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.”
For a variety of logistical and budgetary reasons (not least of which is the 2010 expansion of Medicaid drug rebates to managed care-administered Medicaid drug benefit plans), states have increasingly decided to either allow or require Medicaid beneficiaries to enroll in Managed Medicaid (MM) plans where reimbursement is based on a capitated or Primary Care Case Management (PCCM) model. In contrast to traditional fee-for-service models (FFS), MM plans allow the state government to outsource management of the Medicaid program to one or more managed care organizations.
California, Illinois, Mississippi, New Jersey, South Carolina, Kentucky, New York, and Ohio made the switch in 2011; Texas and Louisiana followed in 2012; Florida, Kansas, Idaho, New Hampshire, and Washington either switched in early 2013 or are expected to do so in the near future.Because a number of the most populous states made the switch early, the share of all Medicaid prescriptions handled by MM plans grew from 19% to 46% (or, in absolute terms, from 4.9 to 12.5 million monthly prescriptions) during the nine month period ending June 2012.A new report from the IMS Institute for Health Informatics uses anonymized patient data from Kentucky, New Jersey, New York and Ohio, to provide an early assessment of prescription drug usage patterns when patients are switched from fee for service to MM plans. In summary, the Institute found that, in comparison to the control group, patients on respiratory drugs in the MM group had a 3% average incremental increase and patients on diabetic therapy had a 6% incremental increase. As shown by an average difference of 7% in generic utilization rates between FFS and MM patients on antipsychotic therapy, the managed care plans were also more successful in driving generic substitution.The study was not constructed to provide conclusive evidence about the affects of shifting patients to MM plans. Nonetheless, its findings are in keeping with more rational medicine use that might be expected in a more tightly managed population: i.e. greater reliance on drug therapy alongside increased generic utilization rates.