New Report Highlights Dramatic Change In U.S. Drug Spending Trends, Policy Implications

Main Category: Public Health
Also Included In: Pharma Industry / Biotech Industry;  Pharmacy / Pharmacist
Article Date: 30 Dec 2008 - 1:00 PDT

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A major reduction in real prescription drug spending growth has created a "turning point" in healthcare with several policy implications, according to a study published this month by the journal Health Affairs as a Web Exclusive. The report, "Prescription Drug Spending Trends in the United States: Looking Beyond the Turning Point," uses IMS Health (NYSE: RX) information adjusted for inflation to document that U.S. prescription drug spending in 2007 fell to its lowest growth rate in more than 30 years. These dynamics reflect the increased use of generic drugs following patent expiration, a marked decline in the number of new molecular entities approved by the FDA, and a reduction in the number of blockbuster drugs.

The growth, size and composition of prescription drug spending is likely to change dramatically in future years, raising significant healthcare policy implications, according to authors Murray Aitken, senior vice president, Healthcare Insight, IMS; Ernst Berndt, professor of applied economics, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; and David Cutler, professor of economics, Harvard University. Among the observations cited:

-- Health spending prospects for payers and consumers appear to be more moderate than previously expected by policymakers, with prescription pharmaceutical costs currently rising very slowly or even falling. Prescription drug spending growth is now likely to be lower than any other major medical care sector.

-- A decline in prescription sales growth may stifle or limit investment in research and development - slowing the pace of medical innovation.

-- Achieving the right balance between regulatory stringency and the introduction of innovative therapies will rise to the top of healthcare policymaker and industry agendas.

-- Used judiciously, cost-sharing initiatives between payers and patients are an effective approach for governments and private payers to limit the growth of future pharmaceutical spending.

-- Additional efforts to reduce growth in drug spending levels by limiting the uptake of new therapies ultimately may not be necessary.

"As future healthcare policy is formulated, new market realities that have emerged over the past five years must be fully acknowledged and recognized," said IMS's Aitken. "What is increasingly clear is that government policymakers and industry stakeholders must work together more effectively to ensure that a robust pipeline of safe, innovative medicines is being researched, developed and made available to patients-" all while achieving an optimal balance between healthcare costs and societal benefits."

In preparing the study, the authors used IMS's National Sales Perspectives, an audit of pharmaceutical product sales from wholesalers to pharmacies and other outlets, and IMS's National Prescription Audit, which tracks prescriptions dispensed by pharmacists. Prescription product sales are reported by IMS using nominal dollars. For purposes of this study, nominal sales amounts have been adjusted by the GDP deflator as calculated by the Bureau of Economic Analysis.

To access a summary of the study, click here.

About IMS

Operating in more than 100 countries, IMS Health is the world's leading provider of market intelligence to the pharmaceutical and healthcare industries. With $2.2 billion in 2007 revenue and more than 50 years of industry experience, IMS offers leading-edge market intelligence products and services that are integral to clients' day-to-day operations, including portfolio optimization capabilities; launch and brand management solutions; sales force effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve ROI and the delivery of quality healthcare worldwide. Additional information is available at www.imshealth.com.

As a global leader in protecting individual patient privacy, IMS uses de-identified healthcare data to deliver critical, real-world disease and treatment insights. These insights help biotech and pharmaceutical companies, medical researchers, government agencies, payers and other healthcare stakeholders to identify unmet treatment needs and understand the effectiveness and value of pharmaceutical products in improving overall health outcomes.