Skyrocketing drug prices and rising number of Rx fuel big increases in spending: HHS

Big Pharma is already under scrutiny for skyrocketing drug prices, and now the industry is facing more pushback. A new report from the Department of Health and Human Services zeroes in on drug price increases as one key driver of rising drug costs.

Drug spending shot up by an estimated 12.6% to $424 billion from 2013 to 2014, the HHS report says. And the trend is likely to continue, with drug spending rising again to $457 billion in 2015.

Higher drug prices are primarily to blame. Prescription drug spending shot up 26% to $424 billion in 2014 from $356 billion in 2010, but the number of prescriptions didn't grow as quickly. "The fact that total expenditures rose more quickly than the number of prescriptions suggests that prices are growing faster than quantities," the report authors said. "Therefore, price changes are contributing more to the growth in spending than is growth in volume of prescriptions."

But it's true that part of the spending increase stems from physicians doling out more prescriptions. Prescriptions jumped 11% to 3.9 billion in 2014 from 3.5 billion in 2010, the report said. Most of that growth comes from individuals getting more prescriptions, but the increase can also be attributed to an overall population increase.

Prescription drugs will compose about 16.7% of all U.S. healthcare spending in 2015, up from a recent low of 15.3% in 2013. For comparison's sake, retail meds only made up about 7% of healthcare spending in the 1990s.

Unsurprisingly, the pharma industry is not on board with these numbers. Industry trade group Pharmaceutical Researchers and Manufacturers of America (PhRMA) said that the HHS report "ignores the tremendous value medicines provide to patients, including many that offer improved treatment options for conditions that previously had few or no options, such as cancer and multiple sclerosis," spokeswoman Holly Campbell said in a statement.

And many factors besides prescription increases and rising drug prices are driving up spending, PhRMA said. New drugs are approved all the time, and older meds are also losing patent protection, which make them more vulnerable to generic competition. "Between 2009 and 2013, more than $105 billion in brand medicines faced generic competition. By 2018, another $115 billion of U.S. brand sales will face similar exposure," Campbell said.

Still, a transition to new, more expensive drugs is driving up spending growth, HHS said in its report. The number of brand-name meds decreased 42% from 2009 to 2015, but revenues for brand-name drugs jumped 13% during the same period.

"That implies a combination of rising prices for brand-name drugs and a shift toward more expensive products among the declining number of brand-name prescriptions," the authors said in the report.

Peter Bach

Peter Bach, head of Memorial Sloan Kettering's Center for Health Policy and Outcomes and a vocal drug pricing critic, also had a thing or two to say about HHS' findings. The report "shows more evidence that escalating drug prices must be addressed in order to keep healthcare costs sustainable," Bach told FiercePharma in an email. 

"The price hikes and rising introductory prices reinforce the fact that spending is outpacing value, and that the current drug pricing system does not reflect the actual value of a drug to people or the health care system," Bach said. "We need to price drugs based on transparency and evidence that encourages biomedical research, reasonable profits and is affordable for patients who need life-saving treatments."

HHS also broke down drug spending increases by area. The agency attributed 30% of the jumps in spending to more expensive drugs being prescribed or drug-price increases; 30% to an increase in the number of prescriptions per person; 30% to general economic inflation; and 10% of the recent drug spending increases into U.S. population growth.

- read the report (PDF)
- here's PhRMA's statement

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