Drug Spending Trends: Biosimilars, COVID-19 Therapies, and More

Eric Tichy, PharmD, MBA, vice chair of pharmacy formulary, Mayo Clinic, offers insight into drug spending trends that emerged over the course of 2021 and predicts how spending will continue to change as the pandemic wanes and inflation reaches the pharmaceutical industry.

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Welcome back to PopHealth Perspectives, a conversation with the Population Health Learning Network where we combine expert commentary and exclusive insight into key issues in population health management and more.

In this episode, Dr Eric Tichy reviews drug spending trends from 2021, as well as where spending may be headed in the future.

Hi, my name is Eric Tichy. I am a pharmacist and a division chair of supply chain management at Mayo Clinic, where I am responsible for the pharmaceutical formulary.

Can you tell us about your recent report? What were the major findings, and did any of them surprise you?

My coauthor team and I published a report that was focused on drug expenditures in 2021 and our projections for expenditures in 2022. We had several interesting findings.

We're focused on drug spending in clinics and hospitals. Hospital drug spending decreased in 2020 and then increased significantly in 2021. So it was a big reversal from what we had seen the year before. In the clinic space, the spending was pretty much similar to what we've been seeing as far as the trends have been going.

Some of the important findings are that the adoption of biosimilar drugs, especially in the oncology space, really took off this year. The biosimilars now account for more than half of the market share in those oncology biosimilar areas, and that really drove a lot of the savings.

In the clinic space, the drug prices actually decreased by about 1.4%, which was very interesting, especially when you put that in the context of general inflation in the economy, to see that brand and generic drug prices in the clinics and hospitals both actually decreased a little bit.

Overall spending increased in both of those areas. And the big driver of the increase was just higher overall utilization of health care. We saw a big rebound from 2020. A big reason why we saw slower growth rates was the lockdowns that occurred at the beginning of the pandemic decreased health care utilization. In 2021—both my direct observation in my work world and the research confirmed this—hospitals have really been jamming. They were super busy all of 2021, because of make-up elective care and then there were surges of COVID-19 that made us very busy. There really has not been any downtime. Those were some of those main drivers.

Another interesting aspect was Remdesivir, which is the only COVID-19 drug that hospitals and clinics have been paying for consistently during this time of the pandemic. Remdesivir accounted for over 8% of total drug expenses in hospitals, which was more than the next three drugs combined. That is very remarkable, and it will be interesting to see what happens as other COVID-19 therapies move from this public health emergency model where the federal government's covering all the costs, to when the regular sectors start to pick those things up.

Thank you. That was a great overview of the major findings. Is there anything else about the other trends you'd like to mention?

Other trends that I'd like to note are that the overall inflation for drugs, which I would consider the drug prices, has been very low. Even the overall inflation for drugs across all sectors averaged only about 1.4%. When you look at consumer inflation running at rates four to five times higher than that number, it's interesting that drugs provided such stability in pricing, because historically, the increases have been in excess of inflation.

It's something that we're watching in the medical community because we want to see if there's a rebound in drug prices as inflation makes its way through different sectors of the economy. Will it eventually hit pharmaceuticals? That's something that we're following closely. And it was interesting to see that there really wasn't inflation in drug prices. Maybe it was the other way around.

Where do you see drugs spending trends headed as we move into the rest of this year and beyond?

We're going to start seeing more biosimilars. The number one overall drug expenditure is a drug called Humira, and that's an anti-inflammatory drug used for a bunch of inflammatory conditions. That drug will face biosimilar competition in 2023. There's a number of competitors that are already approved and waiting to be released in 2023. That is an example of something that's really going to start to put downward pressure on drug prices.

The other factor that we're looking at is new drugs coming into the pipeline that could lead to increased expenses, and especially these COVID-19 therapies as they transition into a more a traditional pathway. When we look at Remdesivir being the number one spend in hospitals or more than the next three drugs combined, I think if we move to a model where we're going to have to do an annual vaccine, COVID-19 vaccines will become a top drug expense. That's something that we're starting to think about and prepare for in our financial modeling.

And then, other COVID-19 therapies. Maybe we use more of the oral therapies in the future instead of Remdesivir, which was an intravenous therapy. A lot of that care could move out of the hospital sector into the home setting and the retail space.

You just mentioned this a little bit, but how can these findings inform practice and the future of care?

One of the trends that the pandemic accelerated is the transition from things being done in hospitals and clinics to things being done in the home setting. I expect that will continue.

We gained some experience giving drugs in the home setting that we hadn't done previously, and we did this out of necessity. I would say that those things worked out pretty well, so I think we'll see continued acceleration of that process. It also does reduce overall health care costs when you can move care into the home setting, and there are a lot of conveniences for patients.

I think, for those reasons, home care is going to accelerate. We've seen double digit growth in drugs being administered in the home care setting over the last 5 years, and that is the most rapidly growing sector.

That's about it for my questions. Is there anything else that we haven't covered that you wanted to add today?

When we spoke last year, one of the things that was interesting and exciting was these new therapies that were approved for Alzheimer disease. There was a new drug called Aduhelm, and because of the price of the drug and the number of patients that potentially could be treated, we thought, "Well, this is going to become, very quickly, the top drug expense in clinics and hospitals." That didn't pan out at all.

We actually only saw $2 million of drug expense for Aduhelm in 2021, even though it was on the market for almost 6 months. That was something that I had not expected. Even at the lowest end of expectations, I expected more than $2 million worth of expenses.

There's a number of drugs that are coming through the pipeline that work in a similar way, and we expect to see those drugs approved in 2022 and 2023. However, because the Centers for Medicare & Medicaid Services have decided that they're only going to pay for these therapies in the context of a clinical trial, we're not going to see big uptake, because CMS is the biggest payer for those. I think that was something there was a lot of concern about in 2021, and we’re anticipating the growth for this will be much lower in future years. It'll take a long time for that to ramp up.

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