The pharmaceutical industry is on track for a banner decade.
Spending on prescription medicines by U.S. patients may rise 41 percent to as much as $480 billion by 2018, according to a new study from researcher IMS Institute for Healthcare Informatics. The biggest drivers in the rise in spending are the implementation of the Affordable Care Act, an aging American population, and higher drug prices, the report said.
Medicaid prescriptions jumped 25.4 percent in states that expanded Medicaid coverage, compared with 2.8 percent in the states that didn't expand coverage. With the Affordable Care Act going into effect in 2014, that led to a 13 percent jump in spending last year, the highest level since 2001, the report found. That surge likely won't be repeated, with the study predicting more moderate growth through 2018. Obamacare was only part of the cause for the spike in spending, however.
"Price increases, mostly in the U.S., contributed to growth in 2014, driven by some specific products and therapy areas where list price increases were above historic norms," the study noted.
The high cost of some prescription medicines is creating controversy, stress and a backlash from patients, doctors and insurers.
Some states are pushing back on the sky-high cost of hepatitis C treatments such as Gilead's Sovaldi, which is an effective treatment but carries a wholesale cost of $84,000 per person for a treatment course. Each pill has a $1,000 price tag. Medicaid programs shelled out $1.33 billion on Sovaldi and other hepatitis C treatments through the third quarter of 2014, or almost the same amount as in the prior three years, The Wall Street Journal reported earlier this month.
Some states are pushing back against paying for Medicaid enrollees to receive the treatment, with Texas spending nothing on the drug during the first nine months of 2014, The Journal noted. A spokeswoman told the publication that "price was the biggest issue" in that decision. Gilead has extended free hepatitis C drugs to more than 100,000 people across the U.S., including several hundred Medicaid-enrolled Texans.
It's not only the latest therapies that are sending pharmaceutical costs skyward. Brand-name medicines have also surged in price since 2007, Bloomberg News found last year. Prices have doubled for established drugs treating conditions ranging from high blood pressure to cancer. New drugs are also introduced at higher prices, with 15 new cancer drugs hitting the market in the last five years that cost more than $10,000 per month.
Higher prices were noted as a reason for the surge in pharmaceutical spending, although IMS noted that patients may be spending far less than the list price.
"Price increases also contribute to U.S. market growth, unlike other countries, though much of these increases are not realized by manufacturers due to rebates and discounts," the report noted.
Spending on new brands rose $20.2 billion in 2014, or triple the previous level, the study added. One-third of overall spending now comes from specialty medicines designed to treat illnesses such as hepatitis C, cancer, and autoimmune diseases.
The U.S. is the biggest pharmaceutical spender among developed and emerging countries, contributing about one-third of $989.3 billion in global spending in 2013. The European Union is the second biggest spender on prescription drugs, with 2013 spending totaling $156.3 billion across the region. Globally, purchases of pharmaceuticals are expected to jump 30 percent by 2018.
Consumers and other stakeholders may become more concerned about value as spending continues to rise, the report noted.
The report noted, "With almost $1.3 trillion in spending on medicines expected in 2018, the focus on the value provided by medicines as an integral part of prevention and treatment has never been more important -- to patients, healthcare professionals and payers alike."