Purpose Historical trends and factors likely to influence future pharmaceutical expenditures are discussed, and projections are made for drug spending in 2016 in nonfederal hospitals, clinics, and overall (all sectors).
Methods Drug expenditure data through calendar year 2015 were obtained from the IMS Health National Sales Perspectives database and analyzed. Other factors that may influence drug spending in hospitals and clinics in 2016, including new drug approvals and patent expirations, were also reviewed. Expenditure projections for 2016 were based on a combination of quantitative analyses and expert opinion.
Results Total U.S. prescription sales in the 2015 calendar year were $419.4 billion, which was 11.7% higher than sales in 2014. Prescription expenditures in clinics and nonfederal hospitals totaled $56.7 billion (a 15.9% increase) and $33.6 billion (a 10.7% increase), respectively, in 2015. In nonfederal hospitals, growth in spending was driven primarily by increased prices for existing drugs. The hepatitis C combination drug ledipasvir–sofosbuvir was the top drug overall in terms of 2015 expenditures ($14.3 billion); in both clinics and nonfederal hospitals, infliximab was the top drug. Individual drugs with the greatest increases in expenditures in 2015 were specialty agents and older generics; these agents are likely to continue to influence total spending in 2016.
Conclusion We project an 11–13% increase in total drug expenditures overall in 2016, with a 15–17% increase in clinic spending and a 10–12% increase in hospital spending. Health-system pharmacy leaders should carefully examine local drug utilization patterns in projecting their own organization’s drug spending in 2016.
Recent data show that healthcare spending in the United States increased at a faster pace in 2014 than previously. While total spending increased 2.9% in 2013, it increased 5.3% in 2014 to a total of $3.03 trillion, or 17.5% of the U.S. gross domestic product.1 Total healthcare expenditures in 2015 are estimated to have been $3.23 trillion, a 5.3% increase from 2014.2 This growth rate was partially attributable to economic recovery and partly due to increased healthcare coverage resulting from the Affordable Care Act (ACA). Nevertheless, at $3.23 trillion annually, the United States outspends all other countries on healthcare.
Pharmaceuticals have generally been viewed as a reasonable investment because of the potentially large impact on clinical outcomes and the relatively small amount spent on drugs as a percentage of total healthcare expenditures. While the high rate of growth in pharmaceutical spending in the 1990s and early 2000s was a challenge for pharmacy and health-system leaders, its moderation over the past decade—largely driven by patent expirations and the increased use of generic medications—led to somewhat diminished scrutiny of drug costs. However, recently there has been a dramatic shift, and high drug costs are now a top concern not just of pharmacists but of the media and the public as well.
This was perhaps best illustrated by the case of pyrimethamine (Daraprim). Turing Pharmaceuticals acquired the exclusive marketing rights to pyrimethamine in August 2015 and then raised the price by over 5,000%—from $13.50 to $750 per tablet.3 The public outcry, which included street protests, was inflamed by the brash comments of Turing’s then chief executive officer, Martin Shkreli.4 In fact, pyrimethamine is just one of many older drug products that have been subject to huge price increases that typically occur after manufacturer consolidation, drug shortages, or other situations that limit competition. These drugs then become targets for predatory pricing practices, and companies such as Valeant Pharmaceuticals have apparently pursued this as a business model.5 However, the media and consumer outcry has not been isolated to older drugs.3,6 The $100,000-plus-per-year price tags of new drugs for cancer and hepatitis C infection have also raised enormous concern and have even led to physicians and policymakers weighing in on the matter.7–9
This article describes drug expenditure trends in 2015, reviews factors likely to influence future drug expenditures, and projects drug spending for 2016. Our intent is to provide information to aid health-system pharmacists and other healthcare leaders in determining how future clinical, regulatory and fiscal changes will affect drug expenditures in their own organizations. We examine trends in pharmaceutical expenditures, both generally and by setting (with an emphasis on nonfederal hospitals and clinics), that may help predict expenditures in 2016. We also examine other factors that may influence future pharmaceutical spending, including new drugs and newly available generics. Finally, drug expenditure growth for 2016 is predicted for nonfederal hospitals, clinics, and overall.
Total prescription sales in the United States in the 2015 calendar year were $419.4 billion, which was 11.7% higher than sales in 2014.
Prescription expenditures in nonfederal hospitals in 2015 totaled $33.6 billion (a 10.7% increase from 2014), driven primarily by price increases for existing drugs.
We project that overall prescription drug spending will rise by 11–13% in 2016, with increases in the clinic and hospital settings of 15–17% and 10–12%, respectively.
Health-system pharmacists should carefully consider the mix of medications used in their own institution when forecasting drug expenditures for budgetary purposes.
The methods used were similar to those used in previous years.10,11 We examined both historical trends in drug expenditures and expected changes in the drug marketplace that may influence drug expenditures in nonfederal hospitals and clinics, including anticipated new drug approvals and patent expirations. Data for the analysis of historical trends in expenditures were obtained from the IMS Health National Sales Perspectives (NSP) database; data coverage extended through December 31, 2015 (i.e., the most recent available data were used).12 NSP data are derived from a statistically valid audit that projects 100% of the purchases in every major class of trade and distribution channel for prescription pharmaceuticals, nonprescription products, and select self-administered diagnostic products in the United States, measuring both unit volume and invoice dollars. The NSP database has been described in detail in previous versions of this forecast.10 All drug dosage forms were included in the analysis (except where noted), and drug class groupings were based on IMS Health’s proprietary Uniform System of Classification.13
For all drug expenditure data from NSP, we reported total dollars spent as well as growth, with the latter being the percentage change (increase or decrease) in expenditures from the previous 12 months. All of the analyses in this article were based on full-calendar-year data, which was not the case in previous editions of this report. Our historical analysis included data on expenditures across all pharmaceutical distribution channels (e.g., retail, mail order). Within channels, we categorized factors that drive changes in pharmaceutical expenditures as (1) new products, (2) price inflation, and (3) volume and mix. Definitions of these categories were provided in a previous version of this report.10 We also examined the top medications based on expenditures, as well as the medications with the greatest growth in expenditures from the previous year. In these analyses, expenditures for each drug were totaled for all brand and generic products and for the various dosage forms. Because the primary focus of this forecast is drug expenditures in nonfederal hospitals and clinics, we analyzed trends in these sectors in more detail.
We also conducted separate analyses of selected drug classes thought likely to significantly influence drug spending in hospitals or clinics, including antimicrobials, with special emphasis on drugs indicated for treatment of hepatitis C virus (HCV) infection and biosimilars. Antimicrobials were categorized, based on their spectrum of activity, as antibacterials, antifungals, and antivirals. Antivirals were further stratified into antiretrovirals, non-human immunodeficiency virus (HIV)–targeted agents (i.e., not including those targeting HIV), and HCV antivirals. HCV antiviral agents included ribavirin, interferon, telaprevir, simeprevir, sofosbuvir, boceprevir, daclatasvir, ledipasvir–sofosbuvir, and ombitasvir–paritaprevir–ritonavir (available with or without dasaburvir). The analysis of biosimilars included filgrastim, tbo-filgrastim, and filgrastim-sndz. We assessed the impact of tbo-filgrastim and filgrastim-sndz on overall expenditures and units of granulocyte colony-stimulating factor (GCSF) products sold from January 2014 through December 2015; one unit was defined as 480 μg, with the number of units sold calculated by dividing the total quarterly expenditures of a product by the corresponding quarterly average sales price (ASP) for a 480-μg dose.
Drug approvals anticipated in 2016 were reviewed because they are expected to contribute to increased drug expenditures; the methods for this analysis were similar to those described in our 2015 report.11 Information for new drug approvals was obtained from company websites and the Food and Drug Administration (FDA).14–33 Pharmaceuticals anticipated to lose patent protection in 2016 and become available in generic form were reviewed to understand the potential for reducing drug expenditures; these products were identified from several sources, including FDA and pharmaceutical company websites and pharmaceutical and biotechnology business news sources.34–36 Additionally, NSP data on generic drug expenditure trends were analyzed. Special emphasis was placed on generic products likely to have a significant impact on expenditures for the entire market and those of particular importance in the hospital or clinic setting.
Finally, we projected drug expenditure growth in 2016 for nonfederal hospitals, clinics, and all settings combined. These estimates were generated through a combination of quantitative and qualitative analyses but should be viewed as opinions of the authors made in consideration of major factors believed to influence future drug expenditures, as discussed herein. Projections from other sources were also examined. These inputs were evaluated by the authors, and consensus opinion was reached as to anticipated ranges for drug expenditure growth in 2016.
Historical trends in prescription expenditures
Total prescription expenditures in the United States for the 2015 calendar year were $419.4 billion, which was 11.7% higher than total expenditures in 2014. Table 1 shows drug spending in 2015 across each of the various distribution channels and sectors. The retail pharmacy sector continued to account for the largest portion of prescription expenditures ($203.8 billion, or 48.6% of total expenditures), followed by mail-order pharmacy ($96.7 billion, or 23.0% of total expenditures), clinics ($56.7 billion, or 13.5% of total expenditures), nonfederal hospitals ($33.6 billion, or 8.0% of total expenditures), and long-term care ($16.5 billion, or 3.9% of total expenditures). Among these top sectors, mail-order pharmacies had the largest percent growth from the previous year (18.9%), which was also the case in 2014. Clinics and nonfederal hospitals also experienced double-digit growth in 2015 (15.9% and 10.7%, respectively).
Factors driving growth
The 11.7% growth in overall pharmaceutical expenditures in 2015 resulted from increased prices of existing drugs (8.4%), spending on new drugs (2.7%), and changes in the volume of drug use (0.5%). Factors that drove growth in 2015 differed by sector. For example, in the clinic setting the 15.9% total growth was driven mostly by an increased volume of drug use (9.0%), as shown in Table 2, with increased prices of existing products and spending on new products contributing 3.8% and 3.1%, respectively. In the clinic environment, the majority of spending ($43.9 billion of $56.7 billion) was for injectable products. However, growth in spending in clinics in 2015 was greater for noninjectables versus injectables—particularly branded noninjectables, which saw a 26.4% increase from 2014. In nonfederal hospitals, the 10.7% increase in drug spending in 2015 was driven primarily by increased prices of existing drugs (7.6%); new products and volume changes contributed 2.6% and 0.5%, respectively. As was the case in the clinic setting, the majority of spending in hospitals ($24.9 billion of $33.6 billion) in 2015 was for injectable products, but in this setting generics and branded generics saw the largest growth (16.5% and 19.5%, respectively).
Trends in overall drug spending
Figure 1 shows the annual changes (increases or decreases) in prescription drug expenditures in the United States from 1999 to 2015 in clinics, nonfederal hospitals, and all sectors overall. Although erratic, the patterns suggest a general decline in the rate of growth through 2008, followed by a leveling-off period and then a steep increase beginning in 2013. The growth in drug expenditures in 2015 (15.9%, 10.7%, and 11.7% for clinics, for nonfederal hospitals, and overall, respectively) was higher than anticipated.11
Top drugs overall
The top 25 drugs based on expenditures across all sectors during the 2015 calendar year are shown in Table 3. The HCV combination drug ledipasvir–sofosbuvir was the top drug, accounting for $14.3 billion in expenditures in 2015. It replaced sofosbuvir (single agent), which was the number 1 drug in 2014 but fell to 24th place in 2015, with a 61.9% year-over-year decline in expenditures (to $3 billion). Adalimumab (at $10.6 billion in expenditures), insulin glargine (at $9.2 billion), and etanercept and rosuvatatin (each at approximately $6.5 billion) rounded out the top 5. Aripiprazole, which became available as a generic in 2015, fell from 2nd to 6th place, with an annual reduction in expenditures of 20.6%. Esomeprazole expenditures dropped 23.0% after the oral product became available as a generic in 2015. Epoetin alfa (–9.1%) and oxycodone (–3.4%) also experienced reductions in expenditures from 2014 levels, which is a continuing trend for both. Among the top 25 drugs by expenditures in 2015, those with the largest percentage increases from 2014 were adalimumab (37.1%), pregabalin (23.4%), and several insulin products, including insulin detemir (34.8%), insulin aspart (28.8%), and insulin lispro (23.2%).
Top drugs in clinics
The top 25 drug products by 2015 expenditures in the clinic setting are listed in Table 4. Infliximab was the top drug, accounting for $3.3 billion in expenditures, followed by pegfilgrastim, rituximab, epoetin alfa, and bevacizumab—each accounting for expenditures of $2–3 billion. Among the top 25 drugs in clinics, those with the biggest percentage increases in expenditures from 2014 to 2015 were pneumococcal vaccine (73.8%), pertuzumab (47.8%), sevelamer (41.9%), darbepoetin alfa (29.5%), immune globulin (26.9%), and denosumab (20.5%). Among the top 25 drugs in clinics, the only agents with reduced expenditures in 2015 versus 2014 were ranibizumab (–13.4%), epoetin alfa (–9.7%), and pemetrexed.
Top drugs in nonfederal hospitals
The top 25 prescription products by 2015 expenditures in the nonfederal hospital setting are listed in Table 5. The 5 top-ranked drugs were unchanged from 2014. These were infliximab (with $1.0 billion in expenditures), rituximab, pegfilgrastim, immune globulin, and alteplase. Among drugs included in the top 25 for nonfederal hospitals, those with the largest increases in expenditures were pneumococcal vaccine (90.1%), radium-223 (45.3%), trastuzumab (22.8%), alteplase (20.8%), and natalizumab (20.6%); drugs with large decreases in expenditures in 2015 were linezolid (–39.4%), bivalirudin (–27.7%), and enoxaparin (–16.7%).
The therapeutic drug categories that accounted for the highest percentages of drug expenditures in nonfederal hospitals in 2015 are shown in Table 6. The top 25 categories shown in the table represented 82.7% of all expenditures in hospitals. As in the past, antineoplastic agents were the top category, accounting for 17.3% of the drug spend in hospitals. As a class, antineoplastic drugs also had significant growth in 2015 (16.6%). Among other categories within the hospital sector with high growth in expenditures in 2015 were hormones (49.9%), cardiac agents (47.8%), antiarthritics (34.6%), vascular agents (32.5%), biologicals (27.0%), and antiviral drugs (26.9%).
Trends in antimicrobials
In 2015, $48.4 billion was spent on antimicrobials across all healthcare sectors, of which 42.8% of the total spend was for antivirals (not including those targeting HIV), 34.2% was for antiretrovirals, 18.1% was for antibacterials, and 4.9% was for antifungals. Expenditures on antibacterial agents decreased (–5.2%) in 2015, as compared with 2014, while spending on antifungals, antiretrovirals, and antivirals increased by 18.8%, 36.0%, and 35.8%, respectively. Almost half (45.3%) of antimicrobial expenditures were in retail pharmacies, followed by mail-order pharmacies (29.7%), nonfederal hospitals (9.1%), and clinics (6.9%).
The top antimicrobials by expenditures in clinics and nonfederal hospitals in 2015 are shown in eTable 1 (available at www.ajhp.org). Clinic antimicrobial expenditures increased 6.9% from 2014. In nonfederal hospitals, antimicrobial expenditures (including antivirals and antifungals) increased 8.3%. Interestingly, at a period when infections by multidrug-resistant organisms were increasing and new parenteral agents were added to the antibiotic armamentarium, antibacterials (as a class) had only a small (1.9%) increase in expenditures.
HCV antivirals as a class continued to experience significant growth in expenditures—an increase of 60.8%, from $11.5 billion in 2014 to $18.4 billion in 2015. Mail-order and retail pharmacies constituted the majority (82.8%) of all HCV agent expenditures, as shown in eTable 2 (available at www.ajhp.org). However, while clinics and nonfederal hospitals accounted for small proportions of HCV antiviral expenditures (6.7% and 1.2%, respectively) in 2015, spending on those agents in these sectors grew significantly, by 74.2% and 242.4%, respectively. As described previously,11 utilization (and thus expenditures) in this class tends to shift rapidly to newer agents. For example, the combination agent ledipasvir–sofosbuvir, which became available in 2014, accounted for the largest portion (77.4%) of HCV antiviral expenditures in 2015.
Trends in biosimilars
Data on total expenditures and units sold for each GCSF product on the market in 2014 and 2015 are shown in eFigure 1 (available at www.ajhp.org). During the first quarter of 2014, expenditures for tbo-filgrastim were approximately $11 million, representing 5.0% of total GCSF expenditures. Tbo-filgrastim expenditures grew to approximately $39 million (17.8% of total GCSF expenditures) by the last quarter of 2015. Filgrastim-sndz was launched during the last quarter of 2015 and so captured only a small percentage of the market (2.7% of all GCSF expenditures). The number of 480-μg units of GCSFs sold was slightly higher in 2015 (2,003,185) than in 2014 (1,979,181), while total expenditures for all GCSF products decreased slightly, from 2014 ($947 million) to 2015 ($915 million).
Recent and anticipated drug approvals
Selected novel agents that may receive FDA approval for sale in the United States by the end of 2016 are shown in Table 7. As in recent years, new approvals expected in 2016 are largely specialty products. Agents for treating inflammatory disorders (e.g., rheumatoid arthritis, psoriasis) and viral infections (HIV and HCV infections) are well represented in the list of expected approvals in 2016. A relatively low proportion of expected approvals are oncology agents, but it has been more difficult to predict oncology approvals due to the fact that most of these agents are granted the “breakthrough” designation by FDA and thus have an average approval time of approximately four months.37 For example, there are several agents targeting immune checkpoint PD-L1 (atezolizumab and durvalumab) and cyclin-dependent kinase (CDK) proteins 4 and 6 (abemaciclib) that currently have the FDA breakthrough designation, but the corresponding new drug application or biologics license application has yet to be filed with FDA.30,38,39 It is likely that these agents will be approved in 2016 or early 2017.
As in the past, we analyzed recent oncology drug approvals to understand the potential impact of these agents on future expenditures. As shown in Table 8, 16 oncology drugs were approved in 2015; data on the approximate cost for 28 days of therapy, based on average wholesale price, are presented.40 Of note, most of these drugs are indicated for use in treating tumor types with a relatively low incidence (e.g., multiple myeloma, thyroid cancer, soft tissue sarcoma), and most of those used to treat a higher-incidence cancer such as lung cancer are targeted toward patients with a specific genetic mutation; thus, the overall impact of new oncology agents on expenditures may be limited. Further, 10 of the 16 drugs are oral agents. These are also not likely to raise inpatient expenditures but may have a spending impact at institutions that manage their own specialty pharmacy. Institutions that have a pharmacist-led oral oncology monitoring program may observe an increase in the workload for adherence and toxicity monitoring. The anticipated new i.v. agents for treatment of multiple myeloma (daratumumab and elotuzumab) are likely to raise outpatient drug expenditures, especially for institutions that have a robust oncology program, because these agents address a previously unmet need.
It should be noted that in analyzing 2015 drug expenditures, we found that the drugs with the highest percentage growth in spending tended to be recently released cancer agents. For example, the immune checkpoint inhibitors nivolumab ($764 million in expenditures in 2015) and pembrolizumab ($393 million in 2015) were among the drugs with the highest growth increases from 2014. The orally administered CDK4/6 inhibitor palbociclib, used in the treatment of breast cancer, entered the market in early 2015 and quickly rose toward the top of the list of oncology drugs by expenditures that year, with $749 million in expenditures.
Patent expirations and generics
Generic drugs, including branded generics, continued to capture a significant proportion of the overall drug spend, accounting for 17.3% of injectable drug spending and 30.9% of noninjectable drug spending across all channels in 2015. In the nonfederal hospital sector, generics accounted for 32.7% of drug spending (30.5% of expenditures on injectables and 38.9% of expenditures on noninjectables). In this sector, spending for noninjectables grew 2.0% for generics and 3.0% for branded generics in 2015, as compared with 2014, and this was largely due to increased prices (Table 2). In the clinic setting, generics accounted for 15.9% of spending (13.6% of expenditures on injectables and 24.0% of expenditures on noninjectables). Much of the growth in expenditures for generics in clinics was due to increased utilization of these agents—although increased prices also contributed to spending growth in the case of branded generics.
Medications with patent expirations in late 2014 or early 2015 were mostly items used in the retail setting; those expirations were thus unlikely to have had a meaningful impact on hospital and clinic spending. However, some generics launched in 2015 had a significant impact on spending in nonfederal hospitals; these included bivalirudin and linezolid, for which expenditures were reduced by 27.7% and 39.4%, respectively (Table 5). Generic aripiprazole and esomeprazole products contributed to reductions in expenditures across all channels, with 2015 spending declines of 20.6% and 23.0% from 2014 levels, respectively (Table 3).
Select branded agents expected to lose patent protection in 2016 are shown in Table 9. Estimating when a patent will expire is complex due to potential litigation, exclusivities, and other factors. However, medications important to drug expenditures in hospitals and clinics that could be available in generic versions in 2016 include albuterol sulfate (for delivery via dry powder inhaler), daptomycin, imatinib, oseltamivir, and rosuvastatin.
While the availability of generics usually reduces overall expenditures, recently there have been sharp increases in the prices of some generic drugs that have led to growth in expenditures. Such increases may be spurred by consolidation of manufacturers, arbitrary price hikes, or drug shortages. We examined the top 15 generic products with high growth in expenditures in 2015 (Table 10). The 15 drugs listed collectively accounted for an increase in expenditures of $2.4 billion (85.6%) over the previous year. One factor influencing high drug expenditure growth for certain generic drugs is the FDA “Unapproved Drugs Initiative,” which targeted for enforcement older unapproved products and, as a consequence, reduced the number of manufacturers of some drugs.41 In 2015, this initiative had a drastic impact on the prices of and subsequent expenditures on vasopressin, neostigmine, and hydroxyprogesterone, for which annual spending increased by 697.7%, 409.2%, and 270.9%, respectively. Other drugs such as isoproterenol, flucytosine, and nitroprusside had dramatic expenditure growth (275.7%, 126.4%, and 112.8%, respectively) due to consolidation of manufacturers.
Drug expenditure forecast for 2016
Based on the drug expenditure trends described above, anticipated new drug approvals, expected approvals of generic drugs in 2016, and our overall assessment of the impact of anticipated changes in the industry, we estimate an overall increase of 11–13% in pharmaceutical expenditures in 2016. We also predict that drug spending in clinics will increase by 15–17% while spending in nonfederal hospitals will grow 10–12% in 2016. These estimates for growth are considerably higher than those we have made in the past but consistent with recent trends and other forecasts.2,42 In the hospital environment, we have observed consistent increases in growth over the past three years. Factors driving this continued growth, including price increases by manufacturers, are not likely to change in the next year. Further, while politicians have lamented drug price increases, actual legislation to rein in price hikes has not occurred; even if such legislation or ballott initiatives were enacted, it would likely not be targeted toward curbing hospital drug expenditures.43 In the clinic setting, expensive new drugs for cancer and specialty medications will drive continued high growth.
Growth in drug expenditures in 2015 in both clinics and nonfederal hospitals continued to be marked by a pattern of steep increases that began in 2013. While the overall growth (i.e., growth in all sectors) was slightly lower in 2015, it was still higher than it had been for most of the past decade. We predict continued high growth in 2016 for prescription drug expenditures in clinics, hospitals, and all sectors combined. Our estimates for anticipated growth in 2016 are higher than those of the Centers for Medicare and Medicaid Services (CMS), which has projected that U.S. retail prescription drug expenditures will increase 6.4% in 2016 and 5.5% in 2018.2,44 Our estimates are also higher than those of Express Scripts, a provider of integrated pharmacy benefit management services, which projected a 6.8% increase in 2016, followed by increases of 7.3% in 2017 and 8.4% in 2018.45 However, both the CMS and Express Scripts forecasts are specific to retail drug expenditures, whereas ours are focused on drug spending in hospitals and clinics.
Overall spending on drugs in the United States is influenced by many different factors, the most important of which are changes in the economy, the population, and the healthcare system. While the economy is difficult to predict, it has been strengthening for the past several years, and most analysts forecast continued growth. The United States also continues to experience the long-term trend of population aging and the associated increases in healthcare needs and spending. At the same time, while the ACA has been credited for moderating growth in healthcare spending, increased access to health insurance with prescription coverage has boosted medication expenditures accordingly. These and other factors are expected to contribute to continued growth in drug spending in 2016 and beyond.2
In this article we have analyzed specific drugs and drug classes that contributed to growth in prescription expenditures in 2015 and may be expected to do so in 2016. Much of the recent and projected future growth has been or will be driven by specialty drugs. In 2015, FDA approved 45 novel agents, most of which were specialty drugs.46 New drugs were approved in all major specialty classes in 2015, including palbociclib for advanced metastatic breast cancer, secukinumab for plaque psoriasis, daclatasvir for HCV infection, lumacaftor–ivacaftor for cystic fibrosis, and selexipag for pulmonary arterial hypertension. In addition to the focus on complex, chronic, or rare diseases, specialty drugs are often high-cost products and may have extensive monitoring, storage, dispensing, administration, patient education, safety, and data reporting requirements. Because the pipeline for specialty drugs is rich and with over 1000 targeted cancer drugs currently in development, we anticipate that these drugs will continue to be a major contributor to drug expenditure growth in 2016 and beyond.45
Among the specialty drugs, those used to treat HCV infection were among the top-ranked agents by expenditures in 2015. Clinics and nonfederal hospitals accounted for a small portion of total HCV antiviral expenditures but are playing a greater role in HCV infection treatment due in part to the growth of health system–based specialty pharmacies. While competition from newer HCV drugs is expected to decrease prices, subsequent savings may be offset by increased utilization as new patients with less severe disease are diagnosed and treated. The Centers for Disease Control and Prevention estimates that chronic HCV infection affects 3.2 million Americans, most of whom have not yet been diagnosed.47 Although payers have attempted to restrict use of these medications to patients with more advanced disease, guidelines from the American Association for the Study of Liver Diseases recommend that all patients with chronic HCV infection receive treatment,48 and CMS has warned state Medicaid programs not to unreasonably restrict coverage of effective HCV-targeted treatment.49 Regardless, spending on HCV antivirals will continue to present an extreme challenge for insurers, patients, and healthcare providers.
Therapeutic categories that were traditionally dominated by lower-cost generics are also likely to be affected by new specialty drugs in the future. In late 2015, two new biologicals—arilocumab and evolocumab—were approved for the treatment of subgroups of adults who require additional lowering of low-density lipoprotein (LDL) cholesterol levels; these drugs target the liver protein PCSK9 (proprotein convertase subtilisin/kexin type 9), inactivating it and thereby reducing circulating LDL cholesterol. There is concern about potential overuse of these PCSK9 inhibitors and subsequent high spending.50 As a result, the payer community instituted strict prior-authorization criteria and coverage policies. Nevertheless, both products are on the type of steep growth curve that is typical for a highly promoted new product in a novel class. During only a short time on the market in 2015, PCSK9 inhibitors accounted for a total of about 4000 filled prescriptions in retail and mail-order pharmacies, with expenditures of nearly $6 million for each product.12
As the specialty drug market grows, hospitals and health systems continue to face barriers to access because of manufacturer-instituted restricted distribution channels. Disruptions in continuity of care may occur, adding to administrative burdens on pharmacy staff. There is also a trend toward more restricted distribution in which specialty drugs can only be dispensed or administered from a network of one or more specialty pharmacies or infusion centers.51 These restrictions present challenges for health systems, especially those undertaking risk-based global payment or population health initiatives. To address these challenges, some health systems have implemented integrated specialty pharmacy as a new ambulatory care pharmacy practice model, which may include a variety of services such as prior-authorization submissions, medication assistance, medication adherence management, and prescription dispensing and delivery to patients. Although more than 100 such programs are established or in development in the United States, fewer than 20 are operated by fully accredited specialty pharmacies; compared with other pharmacy programs, these programs have reported faster prior-authorization approvals, higher medication adherence, and greater patient satisfaction.52
Another increasingly used third-party payer tactic is the site-of-service management strategy for infusion of specialty injectable drugs. Under this approach, health plans restrict patients to a contracted provider of infusion services. In 2015, 31% of health plans reported implementation of a site-of-service management strategy, with 43% indicating plans to implement one in the next 12 months.51 While site-of-service restrictions may save money for health plans, these programs can disrupt continuity of care and reduce revenue for clinic and hospital pharmacies.
Promising to moderate the growth of expenditures in the specialty drug category in the future are biosimilars. To date, the only class of drugs with biosimilar product options is the GCSFs. Our analyses show that total expenditures for all GCSF products decreased after the market entry of competing products and with the general lowering of prices. This may be due to the significant difference in the ASPs of tbo-filgrastim and filgrastim. Although tbo-filgrastim is not technically a biosimilar, its ASP declined significantly over the past two years (from $405 to $370 per 480-μg unit). By the fourth quarter of 2015, the ASP of tbo-filgrastim was 24% less than that of filgrastim. Further, rising utilization of the less expensive product (tbo-filgrastim), coupled with the market entry of filgrastim-sndz, led to an increase in the total number of GCSF units sold from 2014 to 2015. The phenomenon of biosimilars increasing the total volume of GCSFs sold has also been observed in Europe and may be due to relaxed restrictions on use or increased affordability.53
Increasing patient access to expensive medications was one goal of efforts to expand the availability of biosimilars in the United States. The next biosimilar likely to hit the U.S. market in 2016 is infliximab. Its market entry (and presumptive ability to moderate expenditure growth in this area) has been hampered by launch delays because of FDA review setbacks and patent challenges. Other drugs for which biosimilar applications have been submitted to FDA include pegfilgrastim, etanercept, and adalimumab.
In the hospital setting, an issue that has generated significant concern for health-system pharmacy administrators in the past year is high-cost generics. While generic drugs generally continue to have a moderating influence on prescription drug expenditures overall, this impact has been lessened by a decline in blockbuster drugs subject to patent expiration and changes in the generic marketplace that influence prices. Substantial price increases for some generic drugs have been observed across dosage forms and widely reported in the lay press.6 Injectable medications with triple-digit price increases include calcitonin, hydralazine, and vasopressin. A number of oral medications, including hydroxychloroquine, fluoxetine, atenolol, propranolol, digoxin, amitriptyline, tetracycline, phytonadione, and captopril, were subjected to massive price increases in the last year.
These and other notable cases of massive drug price increases—including that of pyrimethamine mentioned earlier—have led to substantial discussions by politicians about potential solutions.54 On February 4, 2016, the House Committee on Oversight and Government Reform held a hearing titled “Developments in the Prescription Drug Market: Oversight” to investigate the practices of Turing Pharmaceuticals and Valeant Pharmaceuticals. ASHP submitted a statement urging Congress to explore potential policy options and market-based solutions to address the recent trend of dramatic price increases for generic drugs.55 It is unknown to what extent congressional or organizational efforts will influence pharmaceutical company pricing of medications. A viewpoint article published in the Journal of the American Medical Association identified three market-based proposals to optimize generic drug cost and availability, which included restricting market entry, encouraging long-term contracts with wholesalers, and creating a futures market.56 While efforts to curb price increases in the generic markets are explored, pharmacists need to continue to control costs through proper formulary management tactics such as waste reduction, implementation of stocking efficiencies, and initiatives to ensure appropriate medication use through adherence to clinical criteria.
Another issue with the potential to affect drug expenditures in some health systems is the implementation of major revisions to the federal 340B Drug Pricing Program, which provides discounted drug prices on covered drugs to participating hospitals and other eligible entities. The Health Resources and Services Administration (HRSA) released the 340B Drug Pricing Program omnibus guidance on August 28, 2015.57 The guidance, which touches on every aspect of the 340B program, proposes new criteria for 340B program eligibility for offsite outpatient facilities and clinics that require that each facility be listed on the covered entity’s Medicare cost report and provide services that have associated outpatient Medicare costs and charges. These criteria would, if implemented, prohibit the purchase of 340B-covered drugs for offsite correctional facilities, since these facilities do not have Medicare charges. The guidance also proposes sweeping changes to the definition of a patient and requires that patients receive prescriptions from a provider who is either employed by the covered entity or who is an independent contractor for the covered entity. This would exclude prescriptions generated as the result of a referral to an outside prescriber, such as in the case of cancer patients who, after receiving prescriptions from an outside specialist who is not contracted with the covered entity, return to their community hospital for treatment. Patients must also receive prescriptions that result from a billable outpatient visit, which would exclude discharge prescriptions. Patients with emergency department or observation visits would not be eligible if the visit led to an inpatient admission.
HRSA received 1264 comments to the proposed guidance, and the final guidance is expected in late 2016 or in 2017. Covered entities can expect reductions in their 340B program–related savings if any or all of the aforementioned proposals are approved, which could have an impact on the breadth of services they provide to uninsured or underinsured patients.
As we have suggested previously, pharmacy leaders must keep abreast of important developments in healthcare policy, finance, technology, and practice in order to be optimally prepared for changes that may influence practice and thus have an impact on medication spending. The analyses and projections presented here focus on factors likely to influence healthcare spending and prescription drug expenditures in 2016, but pharmacy leaders should also carefully monitor other developments that are likely to have an impact on departmental budgets in the coming years. Additional guidance on emerging issues that may influence drug spending can be found in the newly released fourth annual edition of the ASHP Foundation report Pharmacy Forecast 2016–2020: Strategic Planning Advice for Pharmacy Departments in Hospitals and Health Systems. We strongly urge readers to review and use this report in financial and strategic planning. The complete report is freely available online (www.ashpfoundation.org/pharmacyforecast).
Our analysis and forecast should be considered with an understanding of its important limitations. The primary source of the drug expenditure trend data was the IMS Health NSP database; while this is a very reliable database, there are characteristics of the data sets used in our analyses that should be considered when interpreting our results. The NSP database is continually updated, and any analysis may yield slightly different results depending on the timing of data access. For this article, data were extracted on February 2, 2016. We refer readers to a previous version of this forecast for a complete description of other characteristics and potential limitations.10 One such limitation was that the IMS data do not include expenditures by the Veterans Affairs system. The absence of these data began in calendar year 2014. This limitation affected our estimates of expenditures for federal facilities, as shown in Table 1, and, to a lesser extent, the total for all channels. Another limitation (one not previously noted) was our categorization of medication expenditures by therapeutic drug class. Drugs that are used across multiple indications are categorized only by the primary therapeutic drug class. On the other hand, a previously noted limitation that we have rectified in this version of the annual forecast is the use of full-calendar-year data for our analysis of historical trends; previously in our analysis of trends, data collection for each year extended only through the end of September, potentially leading to conclusions unduly influenced by seasonal fluctuations in utilization. Finally, as in previous years, our analysis was also based on the availability of information on new drug approvals and patent expirations, much of which came from FDA sources as well as pharmaceutical company news reports. Because of the dynamic nature of this information, some drugs may have been overlooked, and accurate information on some drugs may have been unavailable.
The limitations noted above all may have influenced both our findings with regard to historical trends and the accuracy of the predictions made for spending in 2016. Further, although based on a careful analysis of key trends and factors expected to affect medication spending, our forecast was based primarily on the expert opinion of the authors. We have analyzed the accuracy of our past predictions, and, while not without error, they have been comparable in accuracy to those of annual estimates from CMS.58 Still, we caution readers not to blindly use our projections as “multipliers” to adjust prior-year budgets for the next period. Instead, local data should be carefully and systematically incorporated into an organization-specific drug expenditure forecast, with proper consideration of external trends relevant to drug expenditures, as described in this article.59,60
We project an 11–13% increase in total drug expenditures across all settings in 2016, with a 15–17% increase in clinic spending and a 10–12% increase in hospital spending. Health-system pharmacy leaders should carefully examine local drug utilization patterns in projecting their own organization’s drug spending in 2016.
The authors thank all of the individuals who served as reviewers for this article and the ASHP Section of Pharmacy Practice Managers for supporting this effort. The statements, findings, conclusions, and views contained and expressed herein are those of the authors and do not necessarily represent the views of ASHP, the U.S. government, the Department of Veterans Affairs, or IMS Health Incorporated or any of its affiliated or subsidiary entities.
Supplementary material is available with the full text of this article at www.ajhp.org.
An audio interview that supplements the information in this article is available on AJHP’s website at www.ajhpvoices.org. Readers can also access this interview through AJHP’s augmented reality (AR) feature by launching the Layar app and scanning this page with their mobile device.
Dr. Schumock has consulted for or received research funding from Abbvie, Astellas, and Baxter in the past three years; both he and Mr. Vermeulen are uncompensated members of the IMS Health Services Research Network Steering Committee, from which much of the evaluated data was obtained. Dr. Li has received honoraria for advising and/or speaking from Amgen, Hospira, Merck, Pfizer, and Sandoz. The other authors have declared no potential conflicts of interest.
- Copyright © 2016 by the American Society of Health-System Pharmacists, Inc. All rights reserved.