Affordable Care Act Projected to Drive Up Prescription Drug Spending in Coming Years

Specialty drugs expected to account for 40% of total prescription spending by 2016, according to Catamaran Corporation.

While the overall benefits of the Affordable Care Act (ACA) are still hotly debated, there is little doubt the landmark legislation will lead to a boon for the pharmaceutical industry and the specialty drug market, according to the latest drug trend update from the Catamaran Corporation.

Catamaran, which provides pharmacy benefit management (PBM) services and technology, recently released a trend report updated for the first quarter of 2014 that calls for an upward trajectory for pharmacy spending due to the combined impact of health care reform and a robust drug pipeline. Technological advances and a growing demand for specialty therapies is expected to drive specialty medications to account for approximately 40% of all pharmacy spending by 2016.

“The impact of health care reform will become readily apparent across pharmacy purchasing and benefits,” the report states. “US spending on prescription drugs is estimated to increase in the retail space by $227 billion between 2010 and 2020.”

Last year, the average cost of a specialty prescription grew 17% to $2860 as a result of increased utilization and more expensive products, according to the report. For 2014 alone, Catamaran projects prescription drug spending to grow by 5.2%, which is approximately 2.9% greater than what the estimated growth would be if not for the ACA.

The report projects that the ACA will generate more than 30 million new PBM customers, which will “stimulate creative cost management paradigms and entice new entrants into the PBM sector.”

The health reform factors playing the largest role in the anticipated spending growth are the requirement for expanded essential health benefits for plans through employers with 50 or more employees; the increased use of prescription drugs by 32 million people projected to be newly insured by 2019; and more generous insurance benefits that limit out-of-pocket spending, which shifts additional costs back to employers and health plans.

Additionally, Catamaran predicts that the looming pharmacy demand will lead to expanded cost containment and coordinated care measures.

At the heart of this increased demand are expected to be specialty medications, which currently comprise more than 50% of the pharmaceutical pipeline, with specialty products accounting for 15 of 27 novel new drugs approved by the FDA last year. Pricing for specialty products continues to be an issue, specifically in the areas of oncology drugs and agents with orphan drug status and breakthrough therapy designation.

More than 30% of new drugs approved in 2013 were oncology drugs, which are projected to represent approximately 14% of the worldwide market share by 2018, with targeted oncology therapies accounting for over $69 billion in sales, according to Catamaran.

“While drug costs are higher for specialty medications, those within the oncology class, as well as orphan drugs and those deemed breakthrough therapies, seem to be the costliest,” the report states.