Report: The costs of specialty drugs are soaring

IMS Health report finds increase in drug prices, use of health care services

In 2013, U.S. residents spent more on prescription drugs and used more health care services than they did in 2012, according to a new report from IMS Health.

According to the report, consumer spending on prescription drugs last year increased by 3.2% to $329.2 billion. Although it was smaller than the two-digit increases recorded in previous decades, the spending increase was a reversal from a one percentage point decline in prescription drug spending in 2012.

The report cited several factors for the increase in prescription drug spending, including:

  • High costs of some new brand-name drugs;
  • A $10 billion reduced impact of patent expirations, compared with 2012; and
  • The first spike in use of health care services in about three years.

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The uptick in specialty drugs, costs

The growth in prescription drug spending was curbed slightly by an increase in the use of generic drugs, which accounted for roughly 86% of all prescriptions filled last year. The low-cost versions of the brand-name drugs accounted for about 84% of all prescriptions filled in 2012, even though 2012 saw more generic drugs introduced to the market than in 2013.

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About 23% of prescriptions required no out-of-pocket cost at all, mainly because of a new requirement under the Affordable Care Act (ACA) that contraceptive drugs be covered for free, according to the report. The most expensive drugs accounted for a disproportionate amount of out-of-pocket spending: Just 2.3% of all prescriptions accounted for 30% of all out of pocket costs, according to the report.

"The new drugs coming to market are more specialized, and more tailored to smaller populations of patients, which tends to make them more expensive because fewer people are ultimately going to take them," says Caroline Pearson, vice president at the health consulting firm Avalere Health. Faced with higher costs, many insurers are shifting some of the cost burden to patients, she adds.

Moreover, there are more drugs on the market, according to the report. Drug companies introduced 36 new drugs in 2013, including 10 cancer treatments and new drugs to treat hepatitis C, multiple sclerosis, and diabetes. Additionally, drugmakers in 2013 introduced 17 drugs to treat what experts call "orphan diseases," which are conditions that affect fewer than 200,000 patients nationwide.

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Americans using health care services more

The report also found that patients' use of various health care services increased across the board, including physician visits, the volume of filled prescriptions and hospitalizations.

Although the report found that the overall number of hospitalizations increased, the number of ED visits that resulted in inpatient admissions declined by 14.6%.

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"Following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. health care system," says Murray Aitken, executive director of the IMS Institute. He added the spike came just before the ACA fully went into effect (Berkrot, Reuters, 4/15; Thomas, New York Times, 4/15).

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Check out our coverage of Elisabeth Rosenthal's New York Times series on costs in health care:

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