Specialty Drugs Drive US Medicine Spending Spike

Specialty drugs powered a 10.3% medication spending increase in the United States last year, thanks in large part to the high cost of new hepatitis C drugs.

A new report from the IMS Institute for Healthcare Informatics found the total dollars spent on medications in the United States increased to $373.9 billion in 2014, with a record 4.3 billion prescriptions filled.

Approximately one-third of this increase was attributed to specialty drugs, which saw spending jump by 26.5%, to $124.1 billion, due in large part to the $12.3 billion spent on hepatitis C drugs in 2014.

“Last year’s $43 billion growth in spending on medicines was record-setting and the result of simultaneous very high levels of spending on new drugs and an unusually low level of patent expiry impact,” said Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, in a press release.

The total dollars spent on medications last year represented the largest increase since 2001, when medicine spending grew by 17%. This resulted from a rise in spending on innovative new treatment options, less impact from patent expiries, and list price increases from branded medicines, according to IMS.

The report projects more moderate levels of spending growth in the future, as these factors are not expected to continue moving forward.

Just 5 years ago, specialty drugs accounted for 23% of total medication spending. Since then, specialty drug spending has grown by $54 billion, representing 73% of overall medication spending growth in that 5-year period.

IMS noted the main culprit behind specialty drug spending growth was the more than 161,000 patients who started treatment for hepatitis C last year—nearly 10 times the amount in 2013, when many patients were warehoused in anticipation of new treatments.

Oncology medications topped all other drug classes in 2014, as spending grew 16.8% to $43.4 billion, driven by new treatments for melanoma, lung, breast, and prostate cancers. Spending on medications for multiple sclerosis and autoimmune diseases increased by 24.4% and 24%, respectively.

New drugs were responsible for $20.3 billion in spending growth last year, of which $11.3 billion was attributed to 4 new hepatitis C drugs. New treatments for diseases that include multiple sclerosis, cancer, and diabetes contributed to $8.9 billion in increased spending in 2014.

A total of 10 new treatments with an FDA Breakthrough Therapy Designation were launched last year, while the 42 New Molecular Entities approved in 2014 represented the largest number of such drugs to hit the market in a decade. The New Molecular Entities included treatments for disease areas such as oncology, autoimmune disorders, hepatitis C, HIV, multiple sclerosis, and diabetes.

These new drugs were part of a robust research and development pipeline that has shifted to specialty medications over the past 10 years. In fact, 42% of the late-stage pipeline is now comprised of specialty drugs, up from 33% a decade ago.