[April 15, 2014]

IMS Health Study: Spending Growth Returns For U.S. Medicines

Total spending on U.S. medicines increased 1.0 percent on a real per capita basis in 2013, while the use of healthcare services overall rose for the first time in three years, according to a new report issued today by the IMS Institute for Healthcare Informatics (News - Alert).

The study - Medicine Use and Shifting Costs of Healthcare: A Review of the Use of Medicines in the United States in 2013 - found that total dollars spent on medications in the U.S. reached $329.2 billion last year, up 3.2 percent on a nominal basis and a rebound from the 1.0 percent decline in 2012. Primary drivers include the reduced impact of patent expiries, price increases, higher spending on innovative new medicines, and greater use by patients of the healthcare system. Patent expiries in 2013 contributed $19 billion to lower medicine spending, compared with $29 billion the previous year. At the same time, 36 New Molecular Entities launched in 2013, the largest number in a decade, focused on specific disease areas that include oncology, hepatitis C and HIV. Overall utilization of healthcare services grew slightly as consumers returned to the healthcare system - primarily through more office visits to specialist physicians as well as outpatient treatments - following several years of self-rationing.

In addition, patients with insurance paid higher out-of-pocket expenses in the form of deductibles and co-insurance last year, even as prescription co-payments declined and are now less than $5 for more than half of all prescriptions filled.

"Following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. 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. "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."

The report's key findings include the following:

• Increase in the utilization of healthcare services and medicines. The number of physician office visits, hospitalizations and prescriptions filled all increased in 2013. The number of patient office visits to primary care physicians fell by 0.7 percent in 2013, while visits to specialists increased by 4.9 percent overall and by 9.5 percent for seniors. The number of hospital visits increased last year, most notably by patients who were commercially insured and received outpatient treatments. Patients filled an average of more than 12 retail prescriptions last year, up nearly 2 percent year over year. Those aged 65 and over filled an average of 28 prescriptions annually, down slightly from 2012.
• Spending on medicines. 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. Price increases for branded products added $4 billion more in spending growth last ear 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.
• Transformations in disease treatment. Patients gained access to 36 New Molecular Entities (NMEs) in 2013, including ten new notable cancer treatments - the most in more than a decade. A total of 27 new oncology drugs have launched in the past three years. Additionally, clusters of innovation are transforming patient care in hepatitis C, multiple sclerosis and diabetes, as well as stroke and acute coronary syndrome. In addition to improved patient outcomes, these and other transformational treatments bring with them a shift in where costs are being incurred in the healthcare system - yielding the promise of fewer doctor office visits, less hospitalizations and reduced use of long-term care facilities. Seventeen orphan drugs - developed for patient populations of fewer than 200,000 individuals - launched in 2013, the most in any year since the passage of the Orphan Drug Act in 1983. The next decade promises a much faster approval process for drugs gaining the Food and Drug Administration's new Breakthrough Therapy Designation.
• Patient payment for healthcare and medicines. Patients with insurance are incurring higher out-of-pocket costs for healthcare services despite lower co-pays for many prescriptions and additional discounts for preventive medicines. Prescription drug costs paid by most patients are declining, with average out-of-pocket costs falling below $5 for 57 percent of all retail prescriptions filled. At the same time, 30 percent of total patient out-of-pocket costs relate to just 2.3 percent of prescriptions, often high-cost specialty medicines. Twenty-three percent of prescriptions now carry no out-of-pocket costs, a dramatic rise in 2013 driven by common preventive medicines that include oral contraceptives.

Analyses conducted for the report are based on IMS Health information resources and focus on prescription-bound products, including Insulins that are available without a prescription. OTC products are excluded from the report. Spending figures are derived from IMS National Sales Perspectives™ and reported at wholesaler invoice prices that do not reflect off-invoice discounts and rebates. Prescription data are derived from IMS National Prescription Audit™, which tracks national prescription trends and activity for all pharmaceutical products. Other IMS Health information resources used in this report include NPA (News - Alert) Market Dynamics™, IMS National Disease and Therapeutic Index™, National Prescription Audit™, Xponent™ PlanTrak Copay and IMS MIDAS™. More detail on information sources is included in the report.

About the IMS Institute for Healthcare Informatics

The IMS Institute for Healthcare Informatics provides key policy setters and decision makers in the global health sector with unique and transformational insights into healthcare dynamics derived from granular analysis of information. It is a research-driven entity with a worldwide reach that collaborates with external healthcare experts from across academia and the public and private sectors to objectively apply IMS Health's proprietary global information and analytical assets. More information about the IMS Institute can be found at: http://www.theimsinstitute.org.

About IMS Health

IMS Health (NYSE:IMS) is a leading global information and technology services company providing clients in the healthcare industry with comprehensive solutions to measure and improve their performance. By applying sophisticated analytics and proprietary application suites hosted on the IMS One intelligent cloud, the company connects more than 10 petabytes of complex healthcare data on diseases, treatments, costs and outcomes to help its clients run their operations more efficiently. Drawing on information from 100,000 suppliers, and on insights from more than 45 billion healthcare transactions processed annually, IMS Health's approximately 9,500 employees drive results for healthcare clients globally. Customers include pharmaceutical, consumer health and medical device manufacturers and distributors, providers, payers, government agencies, policymakers, researchers and the financial community.

As a global leader in protecting individual patient privacy, IMS Health uses anonymous healthcare data to deliver critical, real-world disease and treatment insights. These insights help biotech and pharmaceutical companies, medical researchers, government agencies, payers and other healthcare stakeholders to identify unmet treatment needs and understand the effectiveness and value of pharmaceutical products in improving overall health outcomes.

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