Predictions for the future of high-cost specialty drugs

Doug Long, vice president, industry relations for IMS Health, kicked off Thursday morning, April 21, at the Academy of Managed Care & Specialty Pharmacy Annual Meeting 2016, with his presentation on marketplace trends, “Charting the Course for Change: Industry Update."

LongThe news is not good: U.S. spending on drugs increased 12.2% to $424.8 billion in 2015, spiking 46 billion over the past year due to higher brand spending and fewer patent expirations; however, spending on brands without exclusivity reduced growth by $14.2 billion in 2015.

On the positive side, net price growth slowed in 2015 to 2.8% as concessions from manufacturers rose sharply. Other metrics from 2015 include: Brands accounted for 11% of prescriptions but drove 73% of sales; prescriptions rose 1% in the last 12 months; diabetes, autoimmune diseases, hepatitis and oncology led the spending growth; specialty new brands continued to spur growth (up 21.5%); and Abilify, Celebrex and Nexium lost patent protection.

Long looked back at 2015 and pointed out the most notable events, which included exclusive launches and price wars for hepatitis C, the arrival of the first biosimilar, Zarxio, and of generic Nexium, rescheduling of controlled substances, the unforgettable price gouging by Valeant and Turing, and merger mania extending into 2016.

As far as specialty goes, 2015 brought more innovation to hepatitis C, along with the emergence of PD1s, PCSK9 inhibitors, orphan drugs, generic Copaxone and more orals, more copayment program cooperation by payers, the patient as payer and more value-driven metrics.

Long predicted that 2016 will continue along the same path with another biosimilar approved, a CMS ruling on Part B reimbursement, a new hepatitis entrant from Merck, new FDA/DEA guidelines on controlled substances, price discussions on orphan drugs and gene therapies and a more-crowded specialty space.

Long said that total prescriptions at chains are expected to far exceed market growth, while mail-order, long-term care and independent pharmacies are going to continue to decline through 2020, at which time, chains could consume a 45.8% share of the market.

Ninety-day prescriptions are becoming more common with chains, up 2% to 3% between 2016 and 2020; they are currently 14% of overall volume.

Next: Generic sales growth slows

Generics’ share of sales growth is slowing, dropping from 42% in 2011 to 8% in 2015; however, the number of total prescriptions for generics far outweighs those for brands, 83.4% and 16.6% respectively.

The U.S. healthcare system has saved $1.7 trillion in the last 10 years because of low-cost generics, $222 billion from antidepressants alone.

The end of patent exclusivity for Abilify and Nexium, helping to save $5 billion a week, along with a generic equivalent of Copaxone (Glatopa), played out in the market last year. During that time, generic price inflation ebbed, and Teva bought Actavis to take control of 20% of the generics market.

This year thus far has seen the final rule for average manufacturer prices under the Affordable Care Act and approval of the launch of generic Gleevec, and awaits patent expirations for Crestor, Benicar and Zytiga; final guidance for approval standards for generic versions of tamper-resistant opioids and for biosimilar interchangeability; and negotiations completed for reauthorization of the generic drug user fee amendments of 2012 and the biosimilar user fee program. 2016 also has set its sights on approval of additional biosimilars.

Although Long expresses optimism for the arrival of more biosimilars, he outlines the challenges: Development costs on average of $200 million compared to regular generics topping out at $4 million. In addition, he points out that not only is there an uncertain regulatory framework, but manufacturers are hard pressed to justify the costs for a limited user population.

Moving ahead

Long jumped ahead to 2020, when according to IMS Health, U.S. spending on medicines will reach $610 to $640 billion on an invoice price basis, with steady mid-single digit growth. In addition, Long expects innovation to drive a transformation of disease treatments, including more than 470 drugs to treat orphan diseases; breakthrough therapies for hepatitis C and autoimmune, heart and orphan diseases; and cancer drugs as market leaders; the latter comprised one-third of all launches last year.  

He anticipates that specialty spending will eat up 35% of dollars for 1% to 2% of prescriptions; innovation around the diseases recounted above; near-term focus on hepatitis C, PCSK9s, PD1s and orphan drugs; tools for managing generics, biosimilars and the appropriate use of medications; targeting of appropriate patient populations; exclusive contracts; and more price negotiations.

Despite the high cost of new specialty drugs, there are opportunities to curb rising healthcare and drug costs, Long says, by reducing readmissions, proving timely treatment, optimizing the use of drugs and improving adherence. Failure to take medications as directed drives $260 billion in additional care costs.

“Tomorrow’s models will be built on alignment and cooperation,” Long concluded, “having moved from a fee-for-service model to managed care and integrated delivery systems and finally to population management.”

Mari Edlin is a frequent contributor to Managed Healthcare Executive. She is based in Sonoma, California.