Get ready for a drop in branded drug spending this year, thanks to rebates and discounts: report

Global drug spending is heading to $1.4 trillion by 2022, according to IQVIA. (Pixabay)

There's been no shortage of discussion about growing drug costs, with the U.S. market drawing significant attention in recent years. But in a new market analysis, the IQVIA Institute for Human Data Science has concluded that branded drug spending in developed countries will fall this year and remain flat over the next five. 

The downward shift comes even as IQVIA expects pharma's bill to grow 3% to 6% annually around the world, reaching $1.4 trillion in 2022. But that's before rebates and discounts. The difference in gross and net spending highlights the concessions drugmakers are offering to win access, according to Michael Kleinrock, research director of the IQVIA Institute for Human Data Science.

"A lot of that is invoice growth that doesn't turn into net growth," Kleinrock told reporters on a conference call.

In its report, released Tuesday, IQVIA highlighted 10 trends affecting the drug industry this year, many of which market watchers will recognize. Among them are a leap in approvals for next-gen biotherapeutics such as CAR-T meds, growth in specialty medicine spending and a growing market for biosimilars.

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As spending on traditional medicines slips in the coming years, specialty drugs will continue their ascent, according to the analysts, reaching 48% of total drug spending in developed countries by 2022. 

IQVIA, which formed with the merger of IMS Health and Quintiles back in 2016, predicts net per capita spending will decline in the U.S. this year and stay flat through 2022. This comes despite 7% to 10% price hikes across the industry that end up in the 2% to 5% range after rebates and discounts. The authors noted that payer negotiations are "effectively offsetting price increases" and that patent losses will play a bigger role in the coming five years than they have in the past five years.

Meanwhile, outcomes-based contracts will continue to play a limited role as an "administrative burden" to their implementation remains, despite excitement by some in the drug industry over their savings potential.

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The report adds to evidence that drug spending growth after rebates and discounts has significantly moderated. A year ago, QuintilesIMS published research concluding that U.S. pharma spending after rebates grew 4.8% in 2016, compared to 8.9% the year prior. And in February, Express Scripts published its annual drug trend report detailing a 1.5% increase in per-person prescription drug spending in 2017.