Rx Spending Growth To Be Driven By New Drug Entries, CMS Says
Executive Summary
Advances in cancer, diabetes, and Alzheimer's could lead to expensive new treatments, contributing to spending increases in next decade, according to CMS projections.
Innovative medicines are expected to boost retail prescription drug spending in the next decade and reverse several years of modest growth.
Spending is "expected to rise because of a shift in the intensity and mix of drug usage" associated with development efforts under way in cancer, diabetes, Alzheimer's disease and other areas, which may result in more expensive new drugs, CMS wrote in a Feb. 20 Health Affairs article outlining the agency's national health care spending projections through 2027. Estimates reflect only drugs purchased at pharmacies, not those bought and administered in hospitals or physician offices.
CMS wrote that higher utilization is anticipated, compared to the relatively low levels seen in 2016 and 2017, in part due to newly approved products reaching the market.
FDA had a record-setting year for approvals in 2018. Most of the 59 NMEs and novel biologics were for rare diseases, the first time that has happened. (Also see "CDER's Novel Approvals In 2018 Show Remarkable Review Consistency " - Pink Sheet, 24 Jan, 2019.)
Prescription drug use also will grow from 2020-2027 "as a result of increasingly robust efforts by employers and insurers to reduce any barriers regarding the use of maintenance drugs needed to keep their enrollees with chronic conditions healthy," CMS wrote in the paper.
New Products, New Pressures
New drug spending expectations going forward may be offsetting downward pricing pressure caused by generics. CMS economist Sean Keehan, a co-author of the paper, told reporters during a conference call that the shift from brand to generic use increased over the past 10 years and contributed to slower overall price growth.
Increases in new drug spending could place more pressure on administration efforts to lower drug prices. FDA has been streamlining its ANDA review process to encourage faster and increased generic entry, in the hopes that competition will push prices lower. (Also see "ANDA Sponsors In Drivers Seat For Competitive Generic Therapy Exclusivity" - Pink Sheet, 18 Feb, 2019.)
But other new treatments also are on the horizon, including Sanofi and Lexicon Pharmaceuticals Inc.'s sotagliflozin, a proposed adjunct therapy for glycemic control in type 1 diabetes. The product recently received a mixed recommendation from an FDA advisory committee. (Also see "Sotagliflozin: A Potential Test Of Patient-Physician Decision-Making" - Pink Sheet, 22 Jan, 2019.)
House Democrats also are targeting insulin in their drug pricing inquiries. Rep. Diana DeGette, D-Colo., has indicated that insulin makers may be the first to be called to Energy and Commerce Committee Subcommittee on Oversight and Investigations hearings. (Also see "Insulin Makers May Be First In Crosshairs Of DeGette Rx Pricing Investigation" - Pink Sheet, 16 Jan, 2019.)
The expectation that upcoming development in Alzheimer's will impact spending also is notable, giving the difficulties sponsors have experienced in the area. Several high-profile failures already have occurred, but studies remain ongoing and there now are attempts to provide therapy early to patients based on genetic profile. (Also see "Interview: AC Immune CEO Reflects On Alzheimer's R&D Post-CREAD" - Scrip, 14 Feb, 2019.)
Drug Price Increases "Modest"
CMS projects that retail prescription drug spending grew 3.3% in 2018 after a mostly flat 0.4% growth rate in 2017. For 2019, spending growth is estimated to increase to 4.6% due in part to higher drug utilization as well as a "modest increase in drug price growth," CMS wrote in the article.
CMS estimated that prescription drug prices will increase on average 2.8% per year from 2018 to 2027, a slight increase from 2008 through 2017, when drug prices increased on average 2.7% per year.
Drug spending is expected to increase much faster in later years, moving up 6.1% per year from 2020 to 2027. Peak growth will be 6.4% in 2023-2024. (See table.)
Drug spending was 9.4% of all national health expenditures and 1.7% of GDP in 2017 and expected to increase to 9.7% of health expenditures and 1.9% of GDP by 2027.
Medicare To See Highest Spending Rate Increase
Medicare is expected to see the most spending growth from 2018-2027, averaging 7.4% per year, compared to estimated average annual growth rates of 5.5% for Medicaid and a 4.8% for private insurance.
CMS attributed the increase in Medicare to increasing enrollment of the aging Baby-Boomer generation, which also will lead to slower private insurance enrollment growth. Private insurance enrollment was projected to increase an average of 0.2% per year from 2018-2027.
Congress' repeal of the individual mandate to purchase insurance, a staple of the Affordable Care Act, will impact 2019. CMS said private insurance enrollment is expected to fall, primarily in the direct purchase market, and spending growth will slow to 3.3% in that sector compared to 4.5% in 2018.
Out-of-pocket expenses are expected to rise faster in 2019 (4.8%) versus 2018 (3.6%), because fewer people will have private insurance coverage. The rate will jump to 5% per year from 2020-2027.