Drug trend curves down while members pay more

June 1, 2013

The 2012 drug trend declined 3.5% but members are paying three to five times more in overall healthcare costs

Growing use of generic medications and brand patent expiries are major reasons why U.S. spending on medicines declined in 2012, according to a new report. The trends contributed to the overall decline in healthcare service utilization.

Total spending on medicines declined by 3.5%, according to the IMS Institute for Healthcare Informatics. In addition, nominal pharmaceutical spending reached $325 billion in 2012, or per capita spending of $898, a decline of 1%.

“IMS has been tracking overall sales in the U.S. for nearly 60 years, and we have never seen a medicine spend decline,” says Michael Kleinrock, director of research development at IMS, who spoke during a media conference call.

Out of pocket rises

Although the drug trend is curving down, members are bearing greater financial responsibility for healthcare costs in general. Patients were likely cutting back on physician visits in 2012 because those with insurance had higher deductibles, copays and co-insurance, according to the report. The average out-of-pocket costs for commercially insured patients under 65 years old reached $1,146 in 2012, a 30% jump from 2011.

The spike is “entirely the result of higher deductibles,” according to IMS. In 2008, average deductibles were $131, climbing to $818 in 2012.

“Consumer-driven health plans, including health savings accounts, are clearly having an impact on patients’ decision-making. Some small to mid-size employers are only offering these types of plans,” Kleinrock says.

In fact, out-of-pocket costs have risen three times higher than they were five years ago. In consumer-driven plan arrangements, member financial responsibility has risen seven times higher in five years.

As is typical of an insured population, 5% of members accounted for 51% of healthcare costs overall, at $15,684 per member. And the highest 1% of care utilizers accounted for 26% of total spending, at $48,735 per member. Members with lower costs tend to have more spending concentrated in pharmacy benefits, however. The lowest 50% of utilizers accounted for 3.3% of expenditures, spending less than $937 per member.

While patients paid higher overall out-of-pocket costs, average prescription drug copays declined by $2 to $121 in 2012. Patients filled 72% of all prescription with a copay of $10 or less.

“Lower co-pays tend to have a dramatic impact on the ability and willingness to afford that medication,” Kleinrock says.

Generic market

Medicine spending dropped for a few different reasons, including effects of major brand drugs’ patent expirations, including Lipitor and Plavix, in 2011. In fact, patent expiries accounted for $28.9 billion of the overall spending in 2012. At the same time, spending on generic medications increased by $8 billion and generics now account for 84% of all prescriptions.  

“Generics capture most of the volume of usage of a molecule following patent expiry and, as a result, they reduce drug costs substantially,” Kleinrock says.

Other factors impacting the overall medicine spend decline include : a decrease of 0.9% in patient visits to physicians’ offices, a slight decline in outpatient treatments, a drop of 0.5% in elective surgeries at hospitals, and a less severe flu season in the early part of 2012, according to IMS.

At the same time, emergency room visits and admissions increased a significant 5.8% in 2012.

“The visits are driven by the insured, not the uninsured. They could have visited an urgent care clinic or a doctor’s office,” Kleinrock says.

The top five therapy areas for spending on medications in 2012 were:

• Oncologics ($25.9 billion)

• Mental health ($23.5 billion);

• Respiratory agents ($22.1 billion

• Antidiabetics ($22.0 billion); and

• Pain ($18.2 billion).

The oncologic class took the lead from mental health medications, which was the top spending category in 2011. Absolute spending growth gains were highest for antivirals (excluding HIV), multiple sclerosis, ADHD, HIV antivirals, and autoimmune diseases.

Antivirals-the therapy area that includes flu vaccines and newer treatments for hepatitis C virus-grew by more than 20%, driven by the breakthrough therapy teleprevir, according to the IMS report. However, a rise in novel disease treatments last year might lower future healthcare costs.

“The new medicines in 2012 represent an amazing group of breakthroughs, including nine new cancer drugs. That is the most new cancer drugs in over a decade,” Kleinrock says.

In total, 28 new molecular entities launched in 2012. Seven orphan drugs, including novel treatments for cystic fibrosis, chronic myeloid leukemia, and multiple myeloma also became available.