A year ago, we looked at data from IMS Health showing how specialty drugs were boosting the fortunes of an industry still reeling from the body-blows of high-dollar patent expirations in preceding years. The figures were encouraging from a top-level view, but the reliance on a handful of products with questionable growth potential (Hep C treatments) left us asking if this was sustainable.
That question is still on our minds. Of course, no one thought last year’s results were a complete aberration, and the new report from IMS shows the trend continues in a healthy fashion (free download with registration). Total US drug spending grew 12.2% to $424.8 billion. The increase in the specialty drug sector was nearly twice that – 21.5% -- and, at $150.8 billion, the category now accounts for more than a third of all domestic drug spending and three-fourths of new brand drug spending. Given that this category has gone from 24% of the market to 36% in just three years, and account for 70% of spending growth over that period, IMS is right, if a bit understated, to call it “one of the most dynamic segments.”
Like last year, Hepatitis C and oncology lead the way. Along with autoimmune treatments, these products account for $19.3 billion of the overall $46.2 billion rise seen by the industry as a whole – with $6.6 billion of the increase coming from Hep C alone. By comparison, spending on oncology treatments as a whole increased by $6 billion, led by new offerings in the form of PD-1 and protein kinase inhibitors.
There are signs that the Hep C wave is cresting, however. As the authors of the IMS report state that “new therapy starts peaked in March 2015 and have started to slow as the majority of patients most in need have sought and received treatment.”
For now, we stand by our statement from a year ago, when we cautioned that the top-line figures did not necessarily herald a new Golden Age for pharma. As we stated then, “these phenomenal revenue figures are really derived from a handful of extremely successful drugs rather than a broad-based industry turnaround.”
To estimate costs associated with infused drugs discarded because they are left over after administration to a patient, Peter Bach of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center and colleagues looked at 20 infused cancer agents with single-vial packaging and weight-based dosing. In the January 20, 2016 issue of BMJ, they report a range of 1% to 33% in the amount of drug left over following administration. After accounting for differences in drug price, they found that the value of products that would not be received by a patient under recommended dosing scenarios equals $1.8 billion or 10% of the combined 2016 sales for these drugs. Roughly $1 billion more is paid to hospitals, clinics, and other providers in the form of “buy and bill” markups for left over portions.
In most other settings, it would be a simple matter to set aside the left over product and use if for the next “customer” but, as is usually the case, the rules and practices governing pharmaceuticals are not so straightforward. The CDC states that single-use vials “should only be used for a single patient” because “these medications typically lack antimicrobial preservatives and can become contaminated.” Although the FDA’s position is not as clear cut as the CDC’s, it also cites microbial contamination along with medication errors as factors that “may” cause problems. CMS’ position, however, is that “it is permissible for healthcare personnel to administer repackaged doses derived from [single-dose vials] to multiple patients, provided that each repackaged dose is used for a single patient in accordance with applicable storage and handling requirements.” Meanwhile, the US Pharmacopeial Convention allows sharing only if the remaining drug is used within six hours and handled by specialized pharmacies.
Adweek has an in-depth article on the evolution of consumer-oriented pharmaceutical marketing. Given that measured DTC spending declined from a peak of $5.4 billion in 2006 to $3.5 billion in 2012, the industry has already been moving away from mass market product-oriented advertising towards value-added, relationship-oriented marketing. Big Data will enable this next wave but, as usual, regulations regarding industry promotional activity lag the technology.
One of the major thrusts of the new approach is an increased focus on patient adherence programs. As we discussed in our recent white paper on the “utilization plateau,” adherence is one of the two most promising strategic options for ensuring continued sales growth in an increasingly challenging U.S. pharmaceutical market.