IMS Health report cites burgeoning growth of specialty medications

PARSIPPANY, N.J. — Specialty medications helped drive a double-digit gain in total spending on medicines in the United States for 2014, as well as record volume in prescriptions dispensed, according to the IMS Institute for Healthcare Informatics, a unit of IMS Health.

Last year, U.S. spending on medicines rose 10.3% on a real per capita basis to $373.9 billion, with 4.3 billion prescriptions filled, IMS said Tuesday in releasing its “Medicine Use and Spending Shifts: A Review of the Use of Medicines in the U.S. in 2014” report. The study also revealed that 2014 marked the highest number of transformative medicines launched in more than a decade.

Total dollars spent on medications in the United States climbed 13.1% on a nominal basis in 2014, up from a 3.2% rise in the previous year and the highest level since 2001, when growth was 17%. IMS said key drivers in 2014 included higher spending on innovative new treatment options, the lower impact of patent expirations and increases in the list prices of branded drugs.

IMS noted that much of last year’s spending growth came from specialty drugs, which grew 26.5% and represented a third of medicine spending, up from 23% of the total spend five years earlier. New drugs contributed $20.3 billion to growth in 2014, including $11.3 billion from four new hepatitis C treatments. Almost 10 times as many patients were treated for that hepatitis C last year than in 2013, IMS reported.

Over the past five years, the impact of patent expiries has consistently slowed spending growth, the report said. In 2014, that impact was $11.9 billion, down from the peak amount of $29.3 billion in 2012.

During 2014, 42 new molecular entities were launched, which was the largest number in a decade, and they focused on such disease areas as oncology, autoimmune disorders, hepatitis C, HIV, multiple sclerosis and diabetes, according to IMS.

Prices for branded drugs last year rose at an average rate of 13.5% on an invoice basis, but were reduced to a 5% to 7% increase after accounting for off-invoice discounts and rebates, the report said.

In 2014, demand for health care services fell even though it was the first year of insurance coverage for millions of Americans under the Affordable Care Act (ACA), IMS’ study found. From the end of September 2013 to the end of 2014, the uninsured rate dropped 5.1%, with 15.7 million people added to the insured population due to the ACA’s Medicaid expansion, health insurance exchanges and the economic recovery.

“Last year’s $43 billion growth in spending on medicines was the highest ever, and 2014 also was a landmark year in the implementation of the Affordable Care Act,” Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, said in a statement. “Yet the increase in the number of insured patients under the ACA directly accounted for only $1 billion of the spending growth, as patients took some time to ramp up their medicine use — the vast majority of which was inexpensive generics.”

Medicaid patients in states that expanded eligibility filled 25.4% more prescriptions in 2014 than a year earlier, compared with 2.8% more in non-expansion states, IMS said. Newly covered patients in health insurance exchanges had slightly lower levels of increase in medicine use, and 70% of them were commercially insured in the previous year. The report showed that patients with employer-based insurance filled fewer prescriptions last year, due in part to the impact of rising co-payments and deductibles.

Overall health care services demand shifted during 2014, as patients had 3% fewer office visits and 1.7% fewer hospital admissions, but filled 2.1% more prescriptions.

Other notable findings in the IMS report included the following:

• Price hikes for brand-name drugs contributed 8.2% to total market growth on an invoice price basis. Estimated net price growth was much lower, as rising off-invoice discounts and rebates offset incremental price growth and cut the net price growth contribution to 3.1%.

• Spending on specialty medicines increased $54 billion over the past five years, contributing 73% of overall drug spending growth over that period. The biggest driver of specialty spending growth was the more than 161,000 patients who started treatment for hepatitis C in 2014 — more than four times the previous peak, as spending on widely adopted new treatments totaled $12.3 billion.

• High out-of-pocket costs can be mitigated with various forms of co-pay assistance, including coupons and vouchers. IMS noted that as many as half of all branded prescriptions in newer diabetes treatments are now being supported in this way, compared with 8% of brands in all therapy areas.

• The drug research-and-development pipeline has shifted to specialty medicines over the past decade, and 42% of the late-stage pipeline are now specialty medications, up from 33% 10 years ago. Ten therapies were launched in 2014 with “breakthrough therapy” status as designated by the Food and Drug Administration under the 2012 FDA Safety and Innovation Act.

IMS added that 2014 also saw the largest number of orphan drugs launched in a single year, bringing the total number of treatments with orphan designation to 230. Cancer remains the most common orphan drug category, and nine “ultra-orphan” drugs — for populations fewer than 10,000 — became available last year. Among the most anticipated innovations are biosimilars, which began being filed for FDA review in 2014, with approvals already under way this year.