The Prescription Drug Locomotive and the U.S Big Slice of the Global Rx Pie

by Clive Riddle, November 20, 2015

With prescription drug spending now having taken over the locomotive of the healthcare cost train, it behooves stakeholders to better get to know what lies on the tracks ahead. The IMS Institute for Healthcare Informatics has just released the 47-page report: Global Medicines Use in 2020:  Outlook and Implications in which they examine the global use of medicines and spending levels in 2020, including small and large molecules, brands and generics, those dispensed in retail pharmaceutics as well as those used in hospital or clinic settings.

IMS tells us the report “found that total global spend for pharmaceuticals will increase by $349 billion on a constant-dollar basis, compared with $182 billion during the past five years. Spending is measured at the ex-manufacturer level before adjusting for rebates, discounts, taxes and other adjustments that affect net sales received by manufacturers. The impact of these factors is estimated to reduce growth by $90 billion, or approximately 25 percent of the growth forecast through 2020.”

The report also tells as that “developed markets will contribute 63% of the spending, led by the U.S.  Original brands will represent 52% of spending and 85% of global spending will be for medicines to treat non-communicable diseases.” 

A pie chart exhibit in the report is telling in how large the U.S. slice of the medicine spending pie is projected for 2020 – 41% of global spending, with the next closest slice being the entire European Union at 13%.

Report findings on spending impacting U.S. costs include:

• Brand spending in developed markets will rise by $298 billion as new products are launched and as price increases are applied in the U.S., most of which will be offset by off-invoice discounts and rebates. 
• Patent expiries are expected to result in $178 billion in reduced spending on branded products, including $41 billion in savings on biologics as biosimilars become more widely adopted. 
• Many of the newest treatments are specialty medicines used to address chronic, rare or genetic diseases and yielding significant clinical value. By 2020, global spending on these medicines is expected to reach 28 percent of the total.
• More than 90 percent of U.S. medicines will be dispensed as generics by 2020. Generic medicines will continue to provide the vast majority of the prescription drug usage in the U.S., rising from 88 percent to 91-92 percent of all prescriptions dispensed by 2020. 
• Spending on medicines in the U.S. will reach $560-590 billion, a 34 percent increase in spending over 2015 on an invoice price basis. 
• While invoice price growth – which does not reflect discounts and rebates received by payers – is expected to continue at historic levels during the next five years, net price trends for protected brands will remain constrained by payers and competition, resulting in 5-7 percent annual price increases. 

Some international findings include:

• Global medicine use in 2020 will reach 4.5 trillion doses, up 24 percent from 2015.
• Most of the global increase in use of medicines over the next five years will take place in pharmerging markets, with India, China, Brazil and Indonesia representing nearly half of that growth.
• Generics, non-original branded and over the counter (OTC) products will account for 88 percent of total medicine use in pharmerging markets by 2020, and provide the greatest contribution to increased access to medicines in those countries. 
• Newer specialty medicines, which typically have low adoption rates in pharmerging countries lacking the necessary healthcare infrastructure, will represent less than one percent of the total volume in those markets.
• Global spending will grow by 29-32 percent through 2020, compared with an increase of 35 percent in the prior five years. 
• Spending levels will be driven by branded drugs primarily in developed markets, along with the greater use of generics in pharmerging markets—offset by the impact of patent expiries.