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US spending will rise by 34%, reaching $560-590 billion
The annual report, Global Medicines Use in 2020: Outlook and Implications, published by the IMS Institute for Healthcare Informatics, is out and available from the Institute. The bottom-line figures: From 2015 to 2020, global spending on pharmaceuticals will rise by 29-32%, to $1.4 trillion (it is estimated to come in at $1.068 billion when the books close on 2015), or a CAGR of 6.2%. US spending is estimated currently at $430 billion, rising to $560-590 billion by 2020, a CAGR of 5-8%. By comparison, the EU5 (Germany, France, Italy, UK and Spain) is currently $144 billion, rising to $170-200 billion by 2020 (1-4% CAGR). The “pharmerging” countries—a group that IMS defined several years ago and including China and a number of other developing economies—will grow at a 7-10% CAGR, reaching $345-375 billion in 2020. All of these numbers are based on a constant Q2 2015 dollar exchange rate.
A waterfall chart the IMS Institute has developed shows that there will be $178 billion to be saved from patent expiry on branded drugs during the period, but $298 billion to be earned from newly patented drugs, price increases and volume growth (see figure). Not shown is an estimated $90 billion accrued over the five-year span from “incremental net sales adjustment”—the rebates, discounts and statutory price reductions that exist in most economies. IMS doesn’t give a figure for US discounting, but notes that “Brands, on average, will concede as much as one-third of their invoice prices in discounts to payers over the forecast period” in the US. IMS expects 225 new medicines to be introduced during the 2015-2020 period globally.
Those growth rates show the US retaining its role as the funder of much of the R&D for new drugs, through its market-based pricing policies, while Europe continues to utilize many of the same new drugs, but at controlled pricing. That role is going to be under duress in the coming election year, with a variety of measures being proposed (such as having CMS negotiate drug prices with manufacturers).
This year’s report also includes an analysis of prescription volumes around the world, based on an adjusted measure of “standard units”—the term to describe one dose of one medication. In 2020, IMS projects, there will be 4.5 trillion doses administered, up 24% from 2015. Volume growth will be relatively flat in the developed world, but rising in much of the rest of the world. On a per-capita basis, with the developed markets representing 100 in 2020, Saudi Arabia will go from around 70 to 100, and Poland is just behind, going from around 85 to 95. India and China—two of the fastest-growing countries in terms of expanded medicine usage—have a long, long way to go: China is going from about 15 to 18 on this 0-100 scale, and India is going from about 22 to 30.
In a section on the implications of these trends, IMS throws down one provocative challenge to payers (private and government, US and non-US): “Payers will have reduced their practice of isolating drug budgets from other and related healthcare costs due to the growing realization — and availability of data - that healthcare budgets are best managed holistically.” How this plays out in the US’ artificial separation of pharmacy benefits from medical benefits remains to be seen.