Innovative medicines and a healthy late-stage pipeline will drive US drug spending to $640bn by 2020

Annual prescription drug spending in the US could hit $640 billion by 2020 despite an overall slowdown in year-on-year growth, according to a new report.

The figure, which does not consider pricing concessions or other discounts, is quoted in a new IMS study released last week. Factoring in deals, US net drugs costs could top $400 billion for the first time as drug prices rise 22% over the next four years.

In 2015, drug spending totalled $310 billion net, up 8.5% on the previous year and thanks, in part, to spending on speciality drugs, which has nearly doubled in the past five years, driven primarily by innovations in treatment for hepatitis, autoimmune diseases and oncology. Further influencers on the continuing growth of the sector in the past 12 months include the 43 New Active Substances launched – a third of which received orphan drug designation.

A slowdown in growth forecasts

According to the IMS report, invoicing for branded drugs rose 12.4% in 2015, a slowdown when compared to the 14.3% growth of the previous year. While spending will continue to increase through to 2020 and beyond, IMS Health predicts the industry should expect to see single-figure growth year on year as opposed to the double-digits of the past.

The report argues that this slowdown in drug spending is symptomatic of the current industry environment, concluding that heightened competition among manufacturers, health plans and pharmacy benefit managers aggressively limiting price, and continued pressure from generic and biosimilar competition are all contributing factors.

A healthy pipeline

In spite of the conservative growth estimates, the report makes clear that a healthy pharmaceutical pipeline and increases in spending on innovative medicines in particular will be key driving forces of modest industry growth, offsetting growing pricing pressures and a reduction in spending on brands that are due to lose market exclusivity within the next five years. With 2,320 novel products currently in the late-phase pipeline, the study predicts an average of 43 to 49 New Active Substances launching annually over the same five-year period.

Despite reductions in brand spending, prescription volumes have increased 1% year on year, reaching 4.4 billion, with some therapy areas, including antidepressants and anti-diabetes, increasing 10% over that period. The Affordable Care Act is seen as a primary driver in this prescription growth, and the continuing rise of chronic illnesses, such as diabetes, could also be a factor.

"The challenge of balancing access and the cost of care in an era of innovative but more expensive treatments continues as a theme across our healthcare system," said Murray Aitken, IMS Health senior vice president and executive director of the IMS Institute for Healthcare Informatics. "The level of price concessions achieved in 2015 points to a shift in market dynamics as manufacturers accept lower price increases on existing products. At the same time, spending on new brands continued at near-historic levels."

A full version of the report, including the methodology is available from the IMS Health website.