Specialty Drug Spending Grows While Traditional Medicine Spending Drops

The balance of medication spending is strongly shifting from traditional to specialty drugs, which will continue over the next several years, according to a new report by the IQVIA Institute.

The report, titled Medicine Use and Spending in the US, found that overall medication spending increased by 0.6% in 2017 after off-invoice discounts and rebates, including spending on all types of medications. The report notes that specialty medications are rapidly approaching half of overall medicine spending, while net spending on retail and mail-order pharmacy distribution dropped 2.1% in 2017.

The specialty share of net spending across institutional and retail settings has grown from 24.7% in 2008 to 46.5% in 2017. List prices at pharmacies increased 58% over the past 5 years as out-of-pocket costs dropped 17%, which reflects the dynamics that drive how much patients pay for medications and how drug costs influence whether patients fill their prescriptions, according to the authors.

“Significant shifts in the regulatory process are becoming apparent, with 19 drugs having received breakthrough designation and 18 including patient-reported outcomes as part of their approved label from FDA,” the study authors wrote.

Over the next 5 years, net medication spending growth is projected between 2% and 5%, with 1% to 4% growth in retail and mail-order prescription drugs.

“This growth, driven primarily by the large number of new medicines, many of which will be specialty and orphan drugs, will be offset by the impact of losses of brand exclusivity,” the authors wrote.

The study showed that specialty drugs compose just 1.9% of total prescription volume but account for 37.4% of spending within the retail and mail-order distribution channels. In the non-retail setting, specialty drugs account for 60% of invoice spending and 2.3% of standard unit volumes, according to the study.

The authors found the use of coupons in 42% of all specialty prescriptions compared with 18% of all branded prescriptions filled through commercial plans. For specialty conditions in which the initial cost of drugs is extremely high—such as autoimmune diseases, hepatitis C, and multiple sclerosis—coupon usage rates are greater than 50%, the study found.

“The largest proportion of new medicines launched in the last five years have been specialty drugs, and specialty share of spending has risen, while traditional net medicine spending has declined by more than $133 per person over the past decade,” the authors wrote.

Net specialty medication revenue was an average of 23% below invoice sales, a difference that was found to be twice as large for traditional drugs. The researchers found that new brand spending has experienced a dramatic shift to specialty, driving $9.8 billion of the $12 billion net growth.

Of 42 new active substances launched in 2017, 32 were for specialty treatments. Meanwhile, the growth of oncology therapies decreased from $5.4 billion in 2016 to $2 billion in 2017, with new drugs for smaller patient populations likely to drive spending growth in the coming years, according to the study.

“As more new cancer treatments reach the market, they are being adopted extremely rapidly, sometimes being subsequently superseded by even newer treatments within just a few years,” the authors wrote. “The pace of development in cancer treatments is accelerating, not just because of the number of new medicines in research, but the combination regimens that may have greater effects than the individual drugs.”

The use of biologics increased 12.6% last year, up from an average of 11.2% over the last 5 years following the launch of new treatments for autoimmune disorders, immunology, and cancer. The entry of new biosimilars is expected to increase competition within this $11.5 billion market, but progress in this area has been restrained.

“The slower volume penetration for the two biosimilars of infliximab (originator Remicade), Renflexis and Inflectra, have so far failed to achieve a great volume share, at least partly because of the highly competitive contracting between purchasers and manufacturers in infused medicines of this type,” the authors wrote.

Despite this, the presence of biosimilars will enhance the ability of payers to negotiate prices with the manufacturers of the reference product and other competing brands, which could restrain spending growth, according to the study. However, a large group of biologics, including top selling adalimumab (Humira), are expected to face biosimilar competition in 2019 pending litigation that could delay market entry.

“If biosimilars are significantly affected by either regulatory, litigation or commercial delays, or if uptake is more limited than expected, savings could be substantially reduced, and spending overall would be higher,” the authors wrote.