[Ip-health] Prescription drug spending jumps 13% to record $374 billion in 2014

Elizabeth Rajasingh elizabeth.rajasingh at keionline.org
Tue Apr 14 08:41:25 PDT 2015


Prescription drug spending jumps 13% to record $374 billion in 2014

Driven by innovative but pricey new drugs for hepatitis C, U.S. spending on
prescription drugs jumped 13% last year to a record $374 billion, according
to an industry report.

The new hepatitis C drugs accounted for more than $11 billion of the
spending, according to a report by IMS Institute for Healthcare
Informatics, an industry research firm. Its annual report analyzes
pharmaceutical sales, top-selling drugs and trends in the industry.

The influx of millions of people newly insured under the Affordable Care
Act was less of a factor than expected — about $1 billion of the spending
growth, it said.

"This was an outstanding year, really a once-in-a-lifetime year," said
Michael Kleinrock, director of research development for IMS Health. "It was
the largest dollar growth in a single year we've ever measured. This is a
huge amount of extra spending."

The bulk of that was from people seeking breakthrough treatments for
hepatitis C — a cure that came with a wallop at the cash register. A
12-week treatment of Gilead Sciences Inc.'s breakthrough hepatitis C drug
Sovaldi could cost more than $80,000 per patient.

Gilead's drugs Sovaldi and Harvoni drove nearly 10 times as many people to
start treatment for hepatitis C last year than in 2013, the report said.
Sovaldi, in its first full year on the market, became the top-selling drug
in the United States, the report said.

The drugs' eye-popping price tags have prompted criticism from government
agencies and insurers, but Gilead Sciences said they were justified.

"Harvoni and Sovaldi offer a cure at a price that reduces hepatitis C
treatment costs now and will deliver significant savings to the healthcare
system over the long term," Gilead Sciences spokeswoman Cara Miller said.
"We believe the prices of Harvoni and Sovaldi reflect the value of the

Also at the top of the list were Otsuka Pharmaceutical Co.'s antipsychotic
drug Abilify and rheumatoid arthritis treatment Humira by AbbVie Inc.

New drugs contributed $20.3 billion to prescription spending. Multiple
sclerosis spending rose 24.4% to $13.9 billion last year, driven by $4.7
billion in new brands and oral therapies.

The steep increase in U.S. prescription drug spending is unlikely to be
repeated this year, Kleinrock said.

Competition has already caused Gilead Sciences to lower the prices of the
hepatitis C drugs, and they are likely to slide further as more drugs hit
the market, analysts said.

Last year was unusual because many hepatitis C patients had avoided
treatment, waiting for the rollout of Gilead's new drugs, said Robyn
Karnauskas, a biotech analyst at Deutsche Bank. This created a massive pool
of patients eager to begin treatment for the liver-damaging virus.

"The therapies were really poor before Gilead's," she said. "All of a
sudden doctors felt comfortable treating these patients, so you saw this
explosion of demand."

The backlog of new patients is likely to diminish as sick people receive
the new treatment, said Philip Nadeau, an analyst with Cowen & Co.

"We project relatively flat sales for the next few years, not really
growing," Nadeau said. "Last year was the big year, and from here on out
it's going to be relatively consistent."

Nadeau said competition from other hepatitis C drugs will drive the pricing
of Gilead Sciences' drugs down to about $50,000 or less.

That's one reason IMS Health's Kleinrock said he does not expect
prescription drug spending to rise as much this year as it did in 2014.

"We do think 2014 is a bit of a one-off and we will see growth come down,"
he said. "But it may be too early to tell."

Elizabeth Rajasingh
Perls Research and Policy Fellow, Knowledge Ecology International
1621 Connecticut Ave. NW, Suite 500
Washington, DC 20009
elizabeth.rajasingh at keionline.org | 1-202-332-2670

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