Following a decline in 2012, nominal and real-per-capita spending for medicines increased in the US, but growth in spending for medicines in the US remains at historical lows.

The US pharmaceutical market recovered in 2013, posting positive growth in both nominal and real-per-capita spending after declines in 2012. A lessening of generic-drug incursion due to fewer and less costly patent expiries was a major reason. Although showing positive signs, the US pharmaceutical market is still experiencing historical lows in growth. Small-molecule drugs, which account for almost three-fourths of the US market, increased only slightly in 2013 as biologic-based drugs and specialty drugs show higher growth rates.

Looking at the numbers
Total spending on US medicines increased from $319.1 billion in 2012 to $329.2 billion in 2013, representing a rebound in both real-per-capita spending and nominal spending, according to a recent study, Medicine Use and Shifting Costs of Healthcare: A Review of the Use of Medicines in the United States, by the IMS Institute for Healthcare Information. In 2013, real-per-capita spending increased 1.0% in 2013 compared to a decline of 3.5% in 2012, and nominal spending increased 3.2% in 2013 compared to a decrease of 1% in 2012. Primary drivers for the improvement include the reduced impact of patent expiries, price increases, higher spending on innovative new medicines, and greater use by patients of the healthcare system. Despite the improvement, when measured in 2005 dollars and adjusted for population growth, medicine spending has been growing at historically low levels for most of the decade.

“Following several years of decline, 2013 was striking for the increased use by patients of all parts of the US healthcare 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 statement. “Growth in medicine spending remains at historically low levels despite a significant uptick last year, and continues to contribute to the bending of the healthcare cost curve.”

While drug spending levels have contributed to slower growth in healthcare costs since 2007, nominal spending rose sharply last year. The largest single driver of the 4.2 percentage point shift in spending growth in 2013 was the $10 billion lower impact of patent expiries, according to the IMS report. Price increases for branded products added $4 billion more in spending growth last year compared to 2012; however, net price growth was essentially flat year over year, reflecting off-invoice discounts and rebates. Overall spending on medicines remained concentrated in traditional small-molecule pills dispensed through retail pharmacies, even as higher growth was seen in biologics and specialty drugs, particularly in retail and mail-order settings.

On the positive side, spending growth for new brands was $6.2 billion in 2013, compared to $5.7 billion in 2012, according to the IMS report. Increases in the pricing of protected branded products, without consideration to off-invoice discounts or rebates, increased spending by $20 billion. The increase in protected brand spending arose as the impact of US patent expiries declined in 2013. The impact of patent expiries in 2013 was $19 billion, which was significantly lower than the $29-billion impact in 2012, due to smaller and fewer patent expiries in 2013 and the roll-off of 2011 and 2013 expiries in the first half of 2013. Eli Lilly’s antidepressant Cymbalta (duloxetine) was the only $1-billion product to lose US patent expiry in 2013, according to IMS, which it did in December 2013. In contrast, in 2012, there were several $1-billion products losing US patent expiry: the anticoagulant Plavix (clopidogrel), the asthma drug Singulair (montelukast), the antidepressant Seroquel (quetiapine), the antidepressant Lexapro (escitalopram) , the diabetes drug Actos (pioglitazone), and the antihypertensive drug Diovan HCT (valsartan). Overall, in 2013, generics reached 86% of US dispensed prescriptions, and spending on generics, including both volume and price effects, increased by $5.8 billion in 2013 compared to the $8.5-billion increase in 2012, according to the IMS report.

IMS segmented drugs into either primary care or specialty drugs and then categorized based on relative strength of new product introductions and exposure to patent expiries. Primary care drugs with limited new medicines introduced and few patent expiries accounted for 39% of US spending in 2013 or $128 billion, a 6.5% increase over 2012, with the increase primarily due to growth in generics. Generic growth contributed 5.1% to overall growth in this class. Of the therapy classes in this group, only dermatology, nervous system disorders, and pain contributed more than $1 billion in growth in 2013, according to IMS.

Primary care drugs with large patent expiries and some new products accounted for $79.6 billion in 2013, a decline of approximately $9 billion or 10.2% compared to 2012. New brands contributed only 1.4% to offset declining growth due to patent expirations. On a therapeutic class level, the classes most affected by generic exposure were lipid regulators, anticoagulants, mental health drugs, respiratory treatments for asthma and chronic obstructive pulmonary disease, hypertension, osteoporosis, and allergies.

Primary care drugs with significant innovation accounted for $36.5 billion in 2013, an 11.1% increase over 2012. Diabetes treatment accounted for $24.3 billion of the $36.5-billion increase in spending, which included new mechanisms for treating diabetes:dipeptidyl peptidase-IV inhibitors, glucagon-like peptide-1 agonists, and sodium-glucose co-transporter 2 inhibitors. In addition to diabetes, other important areas for new treatments were treatments for  genetic disorders, obesity, urinary incontinence, Alzheimer’s, nasal/allergy, and respiratory diseases s not related to asthma and COPD. 

Specialty drugs with recent innovation such as for treatments in oncology, multiple sclerosis, hepatitis C, HIV, and age-related macular degeneration collectively accounted for $73 billion in spending in the US in 2013, up 11.4% over 2012. And other specialty drugs, largely with few new product introductions, accounted for $11.9 billion of US spending in 2013, up 1.6% from 2012, according to the IMS report.

Spending on new specialty medicines increased 7.7% in the US to $7.5 billion and now accounts for 69% of new brand spending (see Figure 1), according to IMS. The five largest drivers for new specialty product spending were for Tecfidera (dimethyl fumarate) for multiple sclerosis, Stribild  (elvitegravir) for HIV-1, Avonex Penn (interferon beta 1-a) for multiple sclerosis, Kadcyla (ado-trastuzumab emtansine) for HER2+ metastatic breast cancer, and Kyprolis (carfilzomib) for multiple myeloma, according to IMS. The $7.5 billion for new specialty medicines accounted for the lion’s share of new spending in the US in 2014, which totaled $10.9 billion.

Figure 1: New Brand Spending on Medicines in the US,  2013*

* New brands are defined as brands launched in the prior 24 months includes products which are new  molecular entities as well as other branded medicines. Numbers rounded in Figure 1. New molecular  entities include both small-molecules and biologic medicines. Figure has been adjusted to reflect  estimated spending for recently launched products where they are understood to be under-reported by  IMS  Source: IMS Health, National Sales Perspectives, January 201 as reported in  Medicine Use and  Shifting Costs of Healthcare: A Review of the Use of Medicines in the United States in 2013, IMS  Institute for Healthcare Informatics.

Branded drugs, small molecules still dominant
Although there has been increased penetration for generic drugs and biologics/specialty drugs, branded drugs and small molecules still dominate the US market on a value basis but growth is nearly flat. In 2013, $232 billion or 71% of the total $329 billion spent on medicines in the US were for branded drugs (defined as products with current or former patent protection or other forms of market exclusivity), but this segment grow only 1.9% in 2013 compared to 2012 (see Figure 2). Branded and unbranded generics accounted for 29% of the market. Branded generics accounted for 12% of the market with 3.1% growth, and unbranded generics accounted for 17% of the US market and which increased 9% in 2013(see Figure 2).  

Small molecules accounted for 72% of the US spending on medicines in 2013, but this segment grew only 0.1%, according to the IMS report. Biologics, accounting for 28% of spending on medicines in the US, increased 9.6% in 2013 over 2012 (see Figure 2). Biologics’ share of the US market increased to 28% in 2013 from 21% in 2008, with most of the growth due to innovations in cancer and autoimmune diseases, according to the IMS report. On a drug-product level, oral drugs accounted for 52% of the US market and increased 1.3% in 2013 compared to 2012. Injectables accounted for 29% and increased 7.3%, and other product forms accounted for 19% of the market and increased at 10.2%, according to the IMS report (see Figure 2).

Figure 2: 2013 US Medicines Spending and Growth Segmentation Comparison

Each bar represents total spending in nominal dollars using a distinct segmentation of overall  spending; the percentage refers to the segments’ share of the total. Brands are those products with  current or former patent protection or other forms of market exclusivity. Specialty, traditional, and  biologics segments are based on proprietary IMS Health definitions. Percentages rounded to single  percent and do not add to 100%  Source: IMS Health, National Sales Perspectives, January 201 as reported in  Medicine Use and  Shifting Costs of Healthcare: A Review of the Use of Medicines  in the United States in 2013, IMS  Institute for Healthcare Informatics.

Therapeutic classes
In 2013, the top five therapeutic classes for the US market were oncology ($27.9 billion), antidiabetes ($24.3 billion), mental health ($23.8 billion), respiratory agents ($20.4 billion), and pain ($18.7 billion) (see Figure 3), according to the IMS report. Absolute spending growth gains were highest for oncology, which increased 9.2% to $27.9 billion, autoimmune diseases, which increased 18% to $17.9 billion, and antidiabetes, which increased 12.1% to $24.3 billion (see Figure 3), according to the IMS report. Spending growth (on an overall percentage basis) was highest for multiple sclerosis (20.7% growth), autoimmune (18.0% growth), and nervous system disorders (16.0% growth) (see Figure 3). Three specialty classes (multiple sclerosis, autoimmune, and oncology) contributed $6.9 billion or 68% of total growth. Spending in two areas, anticoagulants and lipid regulators, declined more than 15% due to patent expiries, and four of the top 10 therapy areas had declines in spending in 2013 of more than 5% (see Figure 3).

Figure 3: US Spending on Medicines in Leading Therapy  Areas

Specialty, traditional, and therapy area definitions are based on proprietary IMS health definitions. Spending measures at the price paid to wholesales or manufacturers by retail and non-retail channels and excluding off-invoice discounts and rebates that lower net prices received by manufacturers. Vaccines exclude flu vaccines, which have been excluded from this edition of the report due to inconsistent data capture across historic periods. Source: IMS Health, National Sales Perspectives, January 201 as reported in Medicine Use and Shifting Costs of Healthcare: A Review of the Use of Medicines in the United States in 2013, IMS Institute for Healthcare Informatics