QuintilesIMS: Worldwide Rx expenditures to hit $1.5T by 2021

DANBURY, Conn., and RESEARCH TRIANGLE PARK, N.C. — Though annual growth stands to moderate, global drug spending will climb to an estimated $1.5 trillion by 2021, up 33% from this year, according to the QuintilesIMS Institute.

Worldwide spending on medicines is projected to grow at a 4% to 7% compound annual rate over the next five years, down from almost 9% growth in 2014 and 2015, QuintilesIMS said in its “Outlook for Global Medicines Through 2021: Balancing Cost and Value” report, released Tuesday. Through 2021, the overall global spend for pharmaceuticals stands to rise by $367 billion on a constant-dollar basis.

Historically large numbers of high-quality new medicines are set to emerge from the R&D pipeline during the next five years. Yet the study noted that pricing and market access pressures, lower volume growth in “pharmerging” markets and more savings from patent expiries will contribute to the lower rate of growth.

Spending is measured at the ex-manufacturer level before adjusting for rebates, discounts, taxes and other adjustments that affect net sales received by manufacturers. QuintilesIMS said the impact of these factors will trim growth by an estimated $127 billion, or about 35% of the growth forecast through 2021.

“The outlook for medicine spending growth reflects a more sustainable level for health systems, following the unexpectedly high growth seen in recent years,” Murray Aitken, senior vice president and executive director of the QuintilesIMS Institute, said in a statement. “At the same time, the astonishing level of scientific advances for disease treatments inevitably will place ongoing pressure on funding for medicines, requiring value-based assessments that balance patient needs and pricing levels with competing healthcare priorities.”

Source: QuintilesIMS Institute

The higher annual drug spending growth in 2014 and 2015 was fueled in part by new hepatitis and cancer medications that will have less impact through 2021, according to QuintilesIMS. Most global spending growth, particularly in developed markets, will be fueled by significant innovations in oncology, autoimmune and diabetes treatments.

During that time span, the United States will continue to be the world’s largest pharmaceutical market, accounting for 53% of projected drug spending growth. China will remain as the second-largest market, contributing 12% of the growth.

QuintilesIMS forecasts that the U.S. drug spending growth will decline to 6% to 7% this year from 12% in 2015. The report projects 6% to 9% growth through 2021 on an invoice price basis. The falloff reflects the end of growth driven by expensive hepatitis C treatments as well as a bigger impact by patent expirations — including the introduction of biosimilars — after a period in which fewer brands faced new generic competition, the study said.

U.S. growth in 2014 and 2015 also was driven by historically high price increases for both branded and generic drugs on an invoice-price basis before the impact of off-invoice discounts and rebates, QuintilesIMS added. After adjusting for price concessions by manufacturers, spending growth stands to be more than two percentage points lower through 2021 and four percentage points lower in 2016, resulting in a 4% to 7% CAGR on a net-price basis.

Medicine costs in the U.S. will be driven by the transformative specialty brands, price hikes and offset by rebates and lower-cost generics. Brand prices will increase more slowly at 8% to 11%, and net prices will rise at 2% to 5% from greater competition and price transparency, according to the report.

Out-of-pocket costs for U.S. patients will fall despite rising brand prescription costs, since over a third of prescriptions will have $0 costs as patients continue to receive co-payment assistance for brands and shift to newly available generics.

QuintilesIMS said the reduction in spending as branded medicines lose exclusivity is expected to total $143.5 billion in the next five years in the U.S. — over 1.5 times more impact than in the last five years — including the impact of biosimilars, which will account for between $27 and $58 billion. Biosimilars will have a sizable impact on spending, with 25 to 35 of these drugs in development. The report said a large percentage of them can be expected to hit the market in the U.S. by 2021, pending regulatory review and litigation.

Over the next five years, new drug launches will escalate substantially worldwide, the report said. More than 2,000 drugs in the late-stage pipeline will yield an expected 45 new active substances (NAS) on average annually through 2021.

The new medicines will address significant unmet needs across a broad range of disease areas, including cancer and autoimmune, metabolic and nervous system disorders. The sheer number of cancer treatments — along with their potential combinations in treatment regimens and the variety of companies involved in development — will bring significant complexity to the patient care landscape during the next five years, QuintilesIMS said.

Dramatic improvements in survival and tolerability are expected and will be accompanied by substantially greater levels of clinical trial and real-world information in support of treatment decisions, according to the report.