Institute Report Oct 14, 2021
Summary
While the level of drug expenditure is closely watched and often
commented upon, the composition of that expenditure and its dynamics are not as
well understood. Typically, official statistics of drug spending only include
drugs dispensed in pharmacies and do not include drugs used in hospitals, an
issue which raises questions about their representativeness of total drug
spending.
In this report, for the first time, we have included estimates
of total drug spending, including hospitals and net of discounts and rebates. These
estimates have been based on official statistics from government agencies in
the countries where available, in some cases not previously published
internationally.
Key messages in the report:
·
While the level of
drug expenditure is closely watched and often commented upon, the composition
of that expenditure and its dynamics are not as well understood.
·
The changes in drug
spending over the past quarter century have been dramatic in terms of the types
of medicine and the diseases they are used to treat.
·
But drug spending as a
share of healthcare spending has changed to a lesser degree and has represented
greater stability than one might have expected.
·
In every country
studied, drug spending is a small proportion of healthcare spending, averaging
15% (and ranging from 9–20%) and has remained relatively flat over the last 20
years, even though the reliance on pharmaceuticals has increased.
·
The cycle of
genericization has continued across therapeutic classes, including cancer; and
the impact of biosimilars is now also seen.
·
The result of these
long-term trends is that medicine utilization has grown over time, driven
primarily by increased use of generics.
·
While new medicines
are often seen as large drivers of growth, in context each era has different
leading classes, and the recent waves of innovation in oncology, diabetes, and
immunology mirror the impact of anti-bacterials, cardiovascular and
gastrointestinal treatments which drove spending a quarter century ago.
·
As an example, the
significant bolus of spending for Hepatitis C from 2013 has largely come and
gone, and further illustrates relatively stable long-term trends.
Key Findings
HEALTH
AND MEDICINE SPENDING TRENDS
Total drug spending
averages 15% of healthcare with countries ranging from 9-20%
·
Drug spending as a
percentage of health spending is inclusive of all products and locations where
they can be delivered (retail, hospitals) and are reported after discounts and
rebates received by payers.
·
Drug spending ranged
from 9% in the UK to 20% in South Korea.
·
Most of the major
developed countries were between 14–18%, excluding the UK and Canada.
Drug spending has been
growing more slowly than health spending in recent periods in most countries
·
When comparing
historic growth for drug and healthcare spending, drug spending has been
growing more slowly than health spending in most countries, particularly in the
last 13 years.
·
Countries where drug
spending has been growing faster than healthcare spending consistently include
Brazil, Canada, and the UK, which in 2018 still have the three lowest drug
spending share of healthcare of the countries studied.
·
Countries with an
upward inflection in the most recent period include Spain, the UK, and Germany;
however, drug and healthcare spending are still within 1% of each other.
Drug spending share of
healthcare has been converging around 15%, where greater variations existed
previously
·
Countries’ drug
spending share of healthcare has been converging, with countries ranging from
4–28% in 2008 and 9–20% in 2018.
·
Those countries with
the highest drug share of healthcare uniformly have lower overall health
expenditure, such as Italy, Spain and South Korea, which all spend less than
$3,000 per capita on healthcare.
·
Across the 11
countries, average drug spending percentage of healthcare rose somewhat
steadily in the late 1990s and then stabilized for most of the last 20 years,
averaging 15% of healthcare across these countries.
The top 5 therapy areas in
1995 and the top 5 in 2020 changed dramatically over the period
·
Protected brands
represent brands that have been in the market for more than 24 months and still
hold market exclusivity.
·
While examining only
protected and new brands, the top five therapy classes in 2020 (oncology,
immunology, anti-diabetics, anti-coagulants, and HIV anti-virals) have grown
from 11% of spending in 1995 to 62% in 2020.
·
The top five therapy
classes in 1995 (cardiovascular, anti-bacterial, anti-ulcerants, mental health,
and cholesterol) represented 53% of spending in 1995, and have collectively
dropped to 6% in recent years, due to generalization and limited innovation.
Spending for protected
brands has declined as patent expires and shifts to generics have not been
offset by innovation
·
Drug classes such as
cardiovascular, anti-bacterials and anti-ulcerants have seen limited new
medicines introduced and therefore have had a declining share of spending.
·
In
cholesterol-reducing drugs, most treatments were introduced in late 1990s and
mid-2000s, and have already lost exclusivity, first with simvastatin in 2006
and then atorvastatin in 2011.
·
In the last five years
the new brands contribute to a small share of drug expenditure due to the
limited uptake of PCSK9 drugs.
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