VOI News

US pharma market growth fueled by a small number of products (again)

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.”

Physician Groups More Vocal in Drug Pricing Debates

While the U.S. remains far from having an officially-sanctioned health economics and outcomes research agency like the National Institute for Health and Care Excellence (NICE) in the U.K. (or any number of similar agencies authorized in other countries over the past decade), some high-visibility (read, pricey) drug categories are receiving similar attention from prominent physician groups.

For example, a joint panel of the American Association for the Study of Liver Diseases and Infectious Diseases Society of America has recommended that new hepatitis-C drugs from Gilead Sciences and AbbVie are cost-effective for certain early-stage patients who are currently denied coverage by most providers. But the group based its findings on an important caveat: the “cost” in “cost-effective” is based on prices 40 to 60 percent below current levels.

That comes on the heels of a draft framework issued by a task force from the American Society of Clinical Oncologists (ASCO) that proposes a methodology for determining the cost-benefit ratio of cancer treatments. As with the hep-C drugs, new cancer therapies, which can cost from $10,000 to $30,000 per month, have spurred the oncologists into action.

The task force has already used the framework to analyze metastatic lung cancer, advanced multiple myeloma, metastatic prostate cancer, and adjuvant therapy for HER2-positive breast cancer. While some treatments scored higher than their older counterparts, others showed negligible improvement, a finding that makes their higher price tags harder to justify in the eyes of payers.

As we discussed here recently, last-year’s hefty growth rates may be somewhat short-lived. While it is too early to determine the accuracy of that prediction, there appears to a gathering of forces that will exert pressure to keep prices down. Most notably, due to mergers announced in the last few months, pharma will face the challenge of increased negotiating leverage from ever-larger insurance companies. Now, physician groups, who have enormous credibility and influence with the public, media, and policy makers, are stepping into the health economics debate in a more organized fashion.