Health Spending Continues to Grow but Rate Slows

Cincinnati—Before the current economic recession began, healthcare costs were increasing faster than wages or the gross domestic product in most major countries. Healthcare spending is now among the most expensive budget items, and there is no end in sight.

Doug Long, vice president of industry relations at IMS Health Incorporated, said as populations and life expectancy continue to rise, countries will need to provide care for more people who are living longer. By 2100, life expectancy in the United States is expected to reach 90 years of age, according to Mr. Long, who spoke during a Contemporary Issues session at the AMCP meeting.

“Everybody is facing this problem throughout the world,” Mr. Long said. “And the problem is only going to get worse.”

This year, although health spending, including drug costs, continues to rise, it is doing so at a slower rate than normal. Through June 2012, prescription drug sales were up 0.1% and prescription volumes were the same as the first 6 months of last year.

In 2011, prescription drug sales increased 1.7% compared with 2010, while the number of prescriptions dispensed fell by 0.3%.

Mr. Long offered a few explanations for the slowing growth in drug expenditures: increased cost sharing, continued poor economic conditions, innovation drought, more over-the-counter medications, and an ongoing introduction of generics.

Of the prescriptions dispensed this year through June 2012, 79.6% were generics, up from 76.7% in 2011 and 63.5% in 2007. By 2015, generics will account for 86% of prescriptions before decreasing, according to IMS Health projections. Generics, which are much less expensive than brands, accounted for 20.5% of sales dollars for the first 6 months of this year, an increase from 18.2% in 2011 and 13.9% in 2007.

“We all know this is a good time for generic companies,” Mr. Long said.

An IMS Health report found that in 2011, patients made 5% fewer visits to physicians’ offices, but emergency department visits increased 7.4%. Mr. Long said that patients are less likely to visit physicians due to the struggling economy and a shift toward high deductible health plans that place an increased burden on people to pay for their healthcare.

According to the report, patients ≥65 years of age reduced their prescription drug usage in 2011 by 3.1%, while patients 19 to 25 years of age increased their prescription drug usage by 2.1%. For the latter group, the biggest increases were for attention deficit hyperactivity disorder drugs, antidepressants, and systemic antibiotics.

Mr. Long added that >75% of prescriptions carry a copayment of ≤$10, and pharmaceuticals (except for specialty drugs) are less expensive than they were 10 or 15 years ago. Still, drug costs account for only 12% of health spending, according to Mr. Long.

IMS Health data show the top 5 drug classes in terms of sales for the 12 months through June 2012 in the United States were lipid regulators ($17.9 billion), antipsychotics ($16.7 billion), antidepressants ($9.9 billion), analogs of human insulin ($9.4 billion), and proton pump inhibitors ($9.1 billion).

Mr. Long mentioned several recent news items that could affect the industry: the Supreme Court upholding the Patient Protection and Affordable Care Act, the Express Scripts-Medco merger, an escalation in Drug Enforcement Administration activities, the settlement in the disagreement between Walgreens and Express Scripts, continuing drug shortages, the increase in specialty pharmaceuticals, and the FDA approval of 2 obesity drugs—Belviq^® (lorcaserin HCI) from Arena Pharmaceuticals, Inc. and Eisai Co., Ltd. and Qsymia^™ (phentermine and topiramate extended-release ) from VIVUS, Inc.