IMS Report: Specialty Medications Drive Prescription Drug Spending Increase

Innovative new specialty drugs helped push total drug spending to $329.2 billion in 2013.

Spending on specialty medications continues to grow, and the gap between the cost of treating medical conditions with generic drugs and the cost of treating more serious illnesses with specialty drugs continues to widen, according to a report released on April 15, 2014, by the IMS Institute for Healthcare Informatics.

The report finds that total spending on prescription medications rose by 3.2% to $329.2 billion in 2013. The increase was attributed to a variety of factors, including higher costs for new specialty drugs, as use of health care services by consumers went up for the first time in 3 years.

“Following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. health care system—even in advance of full implementation of the Affordable Care Act,” said Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, in a press release. “Growth in medicine spending remains at historically low levels despite a significant uptick last year, and continues to contribute to the bending of the health care cost curve.”

Patients with rare or serious conditions were found to bear a much larger burden from out-of-pocket costs than did patients who do not need specialty drugs. The report states that 30% of consumer drug spending last year came from just 2.3% of prescriptions, which had co-pays of more than $70 and which were frequently specialty medications. (Consumers paid an average of $145 in out-of-pocket expenses for these medications.)

In contrast, more than half of all prescriptions carried an out-of-pocket cost of less than $5, and 23% of prescriptions carried zero out-of-pocket cost.

Spending on new specialty treatments increased 7.7% to $7.5 billion in 2013 and accounted for 69% of total spending on new brand name drugs. In addition, total specialty medication spending continues to grow, with an average yearly spending increase of 10% per year over the last 5 years.

The findings are in line with those from a recent report by CVS Caremark projecting annual spending on specialty drugs to rise from $92 billion in 2012 to $235 billion by 2018.

The IMS report identifies the 5 largest drivers of new specialty drug spending as dimethyl fumarate (Tecfidera) for multiple sclerosis, elvitegravir/cobicistat/emtricabine/tenofovirdisoproxil fumarate (Stribild) for HIV-1, interferon beta-1a (Avonex Pen) for multiple sclerosis, ado-trastuzumab emtansine (Kadcyla) for HER2+ metastatic breast cancer, and carfilzomib (Kyprolis) for multiple myeloma.

The report identifies oncology, autoimmune diseases, hepatitis C, and HIV as conditions where new innovations are driving spending increases. Drug spending for those conditions alone collectively grew by 11% to $73 billion in 2013.

Orphan drugs also saw significant growth in 2013, with 17 new drug launches, for a total of 53 launched in the last 5 years, up from a total of 29 over the previous 5 years.

The FDA also granted more than 30 Breakthrough Therapy Designations last year, including 12 in oncology, 4 in hepatitis C, 2 in autoimmune disorders, and several single designations for rare diseases. Three of those drugs were granted Breakthrough approval, 2 for blood cancers and 1 for hepatitis C.

Finally, there were 10 new oncology drugs launched last year, which was the highest number of single year drug approvals for cancer in the past decade.

“Last year saw a number of major advances in cancer treatment including more targeted individual therapies, greater presence in the immunotherapy space, and approval of companion diagnostics seeking to accurately identify patients who will benefit from approved targeted drugs,” the report states.