U.S. Drug Sales Top $329 Billion In 2013, Up 3.2% – IMS Report

IMS Health’s report on U.S. drug spending in 2013 shows a return to growth last year after a decline in 2012, with a lower impact of brands losing patent protection being an important factor, as well as brand price increases.

U.S. drug sales returned to growth in 2013 after a decline in 2012 that was driven by patent expirations for major brands, a report released April 15 by IMS Institute for Healthcare Informatics shows.

Total drug sales for 2013 were $329.2 billion, up 3.2% from $319.1 billion in 2012, the report says. Total sales in 2012 had actually declined $2.3 billion from the previous year, largely due to the launch of generic versions of many popular brands, including six with over $1 billion in sales (Also see "Pharmaceutical Spending Fell Slightly; A First, Says IMS Institute" - Pink Sheet, 9 May, 2013.). There were 1.6% more prescriptions filled in 2013 than 2012. IMS’ sales data includes prescriptions dispensed in retail, mail and non-retail (hospital, clinics, long-term care facilities and home health care) settings.

Sales for the year were led by oncology products, with $27.9 billion. The top 10 therapy areas accounted for over 55% of spending on drugs, although some of those classes had declines for the year, while others registered double-digit growth (see box).

However, the return to sales growth isn’t necessarily cause for celebration by drug manufacturers, the report suggests, since it is a low rate on par with most of the past decade. “When measured in 2005 dollars and adjusted for population growth, medicine spending has been growing at historically low levels for most of the last decade,” IMS observes. The two exceptions were in 2004 (growth of 9.1%), “associated with a period of substantial innovation in medicines,” and 2006 (up 9.3%), the first year of prescription drug coverage under Medicare Part D. The report notes that the 2013 spending growth “is not yet a reflection” of coverage expansion and insurance reforms under the Affordable Care Act.

Top 10 Therapy Areas By Spend In 2013

Oncology*: $27.9 bil., 9.2%

Antidiabetes: $24.3 bil., 12.1%

Mental Health: $23.8 bil., -5.2%

Respiratory: $20.4 bil., -5.2%

Pain: $18.7 bil., 4.1%

Autoimmune*: $17.9 bil., 18%

Cholesterol: $13.6 bil., -17.5%

Blood Pressure: $12.5 bil., -5.3%

HIV antivirals*: $12.5 bil., 9.9%

MS*: $10.6 bil., 20.7%

*specialty drugs

Source: IMS Institute for Healthcare Informatics

The overall $10.1 billion rise in sales in 2013 represents $5.8 billion in increased spending on generics (including both volume and price effects), $6.2 billion in spending growth for new brands and $20 billion from price increases on brands, with these partially offset by a $19.3 billion reduction in spending on brands losing patent protection and a $2.5 billion decline due to lower volume of brand drugs.

The largest difference year-to-year was in the impact of drugs’ loss of patent protection or exclusivity; in 2012, the reduction due to loss of exclusivity was $29.3 billion, $10 billion more than in 2013. The report notes that, unlike 2012 with its half-dozen expirations for drugs with over $1 billion in sales, 2013 had only Eli Lilly & Co.’s Cymbalta (duloxetine) in that range, and it went generic in December.

Nevertheless, generic drugs continue to grow in sales and as a percentage of overall prescriptions. In 2013, generics accounted for 86% of all scripts. This is 30% higher than 10 years earlier. In 2004, generics accounted for only 57% of total scripts. The report notes that the next five years should see patent expirations for an additional 5% to 6% of prescriptions, but that “further genericization of drug usage is not expected beyond 91%-92%.”

Spending growth on unbranded generics rose 9% and accounted for 17% of overall drug spending. When branded generics are included along with unbranded generics, they account for 29% of overall drug spend.

The other big growth story is in specialty medications, which although growing at only 9% in 2013, have averaged 10% growth in the last five years. They now account for 29% of total drug spending, up from 23% in 2008.

A recent report from Express Scripts also found that, although it only looked at the retail and mail prescriptions it managed, spending on specialty drugs made up over a quarter of all drug spending in 2013 (Also see "Specialty Products Top 25% Of Total Rx Spend And Growth To Accelerate – Express Scripts" - Pink Sheet, 8 Apr, 2014.). Express Scripts also expects the growth rate for specialty drug spending to accelerate in the next few years, driven by the recent introduction of high-priced products, particularly to treat hepatitis C. The IMS report does not make projections of future growth.

IMS found that new specialty drugs in 2013 accounted for 69% of spending on new brands (defined as those launched in the prior 24 months). Total new brand spending was $10.9 billion in 2013, slightly lower than in 2012 (-1.8%), but spending on new specialty drugs increased 7.7% to $7.5 billion. The report notes that 36 new molecular entities were launched in 2013, including 20 specialty drugs.

The report says the five biggest drivers of new specialty drug spending were Biogen Idec Inc.’sTecfidera (dimethyl fumarate) for multiple sclerosis, Gilead Sciences Inc.’s Stribild (elvitagravir) for HIV-1, Biogen Idec’s Avonex Pen (interferon beta-1a) for MS, Genentech Inc.’s Kadcyla (ado-trastuzumab emtansine) for metastatic breast cancer and Onyx Pharmaceuticals Inc.’s Kyprolis (carfilzomib) for multiple myeloma. New MS treatments accounted for 19% of new brand spending in 2013.

Copays Below $5 For Most Scripts

Another interesting trend outlined in the report is the declining average amount patients pay when they pick up a prescription at retail. With the rise of generics, 56% of prescriptions had a copay of $5 or less in 2013 (up from 53.4% in 2012) and 23.2% had no copayment (up from 21.7%). Oral contraceptives account for the largest increases in prescriptions with no copay, due to ACA requirements.

On the other end of the copay spectrum, only 2.3% of scripts have copays higher than $70, but they account for close to 30% of total patient out-of-pocket costs. The average out-of-pocket cost for a script in this high-cost group was $145. Many plans have been shifting to formularies with a specialty tier, where the member often must pay a percentage coinsurance for a prescription (Also see "Use Of Specialty Drug Tiers Jumps Among Employer Plans In 2013, Survey Finds" - Pink Sheet, 20 Aug, 2013.).