Drug Price Growth Expected to Slow in US and Worldwide: Report

Ken Terry

March 23, 2020

The prices of US brand-name drugs grew more slowly from 2014–2019 than during the previous 5 years, and the slowdown is expected to continue through 2024, according to the ninth annual report on global medicine usage and sales from the IQVIA Institute for Human Data Science.

IQVIA, formed through the merger of IMS Health and Quintiles, is a global provider of analytics, technology, and contract research services to the life sciences industry.

On an "invoice" basis tied to average wholesale price, US brand-name prices increased at a compound annual growth rate (CAGR) of 5.5% in 2018, compared to 13.5% in 2014. Through 2024, IQVIA expects these prices to grow at a CAGR of 4%–7%.

After discounts, rebates, and payer negotiations, however, net US drug prices are increasing at a lower level, the IQVIA report states. Net US prices rose 4.3% in 2014, compared to 0.3% in 2018, and the CAGR is expected to be in the range of –1% to 2% through 2024.

In nine other developed countries, invoice price growth for brand-name medications dropped 1% in 2014 and 2.2% in 2018. Price changes through 2024 are expected to be from –4% to 1%. Net price changes are projected to be in a range from –5.2% to 2%.

This report was written before the onset of the COVID-19 pandemic.

Developed vs "Pharmerging" Markets

Overall global drug utilization increased from 2009–2019. However, the pace of growth slowed in the second half of that period from a 4% to a 3% CAGR, the report states, "in part due to declines or stagnation in economic growth and changing spending dynamics."

The majority of medicine use is in "pharmerging" markets, some of which have very large populations. However, per capita drug use in those countries is still much lower than in higher-income countries. (A pharmerging market is a nation, such as India, China, or Mexico, in which the average per capita income is below $30,000 per year and pharmaceutical spending growth exceeded $1 billion over 5 years.)

Using a World Health Organization–derived metric called the "daily defined dose" (DDD), the IQVIA report shows a 43% increase in worldwide drug usage from 2009–2019. In developed countries, the growth in usage was only 12%. But utilization leaped by 78% in pharmerging countries.

Among the 10 developed countries included in the report, the United States had the highest net national income per capita, at $51,000. Nevertheless, it was ranked ninth in DDD per capita.

"EU5 countries and Japan rank above the United States in DDD per capita, though they have lower net national income per capita, reflecting the diversity in impacts of implemented healthcare systems and policies, including universal healthcare and the extent of patient cost-sharing," the IQVIA analysts say.

Where the Money Is

Global drug spending is expected to grow more slowly than in the past, the report says. Nevertheless, it is projected to exceed $1.1 trillion from 2019–2024.

Pricing pressures and brand losses are expected to offset rises in medication spending in the next few years, the researchers note. Among the global blockbusters that will lose patent protection during this period are Januvia, Humira, Victoza, and Vyvanze.

Downward pressure on prices is coming from several directions as governments and employers seek to curb price growth. Some payers are trying to use outcomes-based contracts to restrain the high prices of specialty drugs, which now account for 36% of global spending.

The biggest areas of specialty drug spending in developed markets, where most of the action is, are oncology, autoimmune diseases, HIV, immunology, and multiple sclerosis.

New product growth is expected to contribute $165 billion to drug spending through 2024, up from $126 billion in the 2014–2019 period. Of that amount, 78% will be generated by specialty products. IQVIA researchers expect about 270 new molecular entities to be approved from 2020–2024, compared to 236 from 2015–2019 and 200 from 2010–2014.

"Providers will have expanded treatment options, but will continue to be challenged to adjust to rapidly changing and progressively more complex guidelines," the researchers write. "Cost will increasingly be a factor in provider decisions in some geographies."

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