Health spending expenditures for commercial plans are predominantly concentrated among a small population of high-intensity consumers across settings of care.

BACKGROUND: Rising health care spending has sparked new efforts to constrain health care expenditures. OBJECTIVE: To explore how health care spending is distributed across consumers and how utilization patterns compare across health care resource expenditures (eg, hospital, outpatient care). METHODS: Using the IQVIA PharMetrics Plus database, we conducted a retrospective claims analysis for the 2018 plan year to examine commercial health care spending and utilization across 5 settings of care: ambulatory services, inpatient services, office visits, pharmacy services, and additional services. RESULTS: Consistent with findings from previous analyses of total health spending, total health care spending for a large commercially insured population was largely concentrated within a small population of high-intensity consumers. These patterns persist when looking at individual segments of spending, including spending on prescription drugs and inpatient and ambulatory services. Inpatient spending was the most concentrated, with 97% of spending occurring within the top tenth percentile of patients. CONCLUSIONS: Our findings suggest that health care spending for commercial plans is predominantly concentrated within a small population of high-intensity consumers across all settings of care. Curbing rising health care spending will require systemwide evaluation of the value of spending within and across settings of care for a subset of high-resource-use patients. This is particularly important for health care settings with the highest concentration of spending, including inpatient care. DISCLOSURES: This study was funded by the National Pharmaceutical Council (NPC). Ciarametaro, Buelt, and Dubois are employed by the NPC. Kleinrock and Campbell are employed by IQVIA, which was contracted by the NPC for data analysis.

Reconciling the Seemingly Irreconcilable: How Much Are We Spending on Drugs?

BACKGROUND: Estimates of drug spending are often central to the public policy debate on how to manage healthcare spending in the United States. Nevertheless, common estimates of prescription drug spending vary substantially by source, which can inhibit productive policy dialogue. OBJECTIVES: To review publicly reported estimates of drug spending and uncover the underlying methodological inputs that drive the substantial variation in estimates of prescription drug spending. METHODS: We systematically evaluated 5 estimates of drug spending to identify differences in the underlying methodological inputs and approaches. To uniformly assess and compare estimates, we developed a model to identify the inputs of 3 primary components associated with each estimate: numerator (How is drug cost measured?), denominator (How is healthcare cost measured?), and population (What group of individuals is included in the measurement?). We then applied standardized methodological inputs to each estimate to assess whether variation among estimates could be reconciled. We then conducted a sensitivity analysis to address important limitations. RESULTS: We found that the 18.8 percentage point range in the publicly reported estimates is predominately attributed to methodological differences. Reconciling estimates using a standardized methodological approach reduces this range to 4.0 percentage points. CONCLUSIONS: Because variation in estimates of drug spending is primarily driven by methodological differences, stakeholders should seek to establish a mutually agreed upon methodological approach that is appropriate for the policy question at hand to provide a sound basis for health spending policy discussions.

Orphan Drug Expenditures In The United States: A Historical And Prospective Analysis, 2007-18.

The Orphan Drug Act of 1983 established incentives for the development of drugs that treat rare, or orphan, diseases. We used the IMS Health MIDAS database of audited biopharmaceutical sales to measure US annual spending on orphan drugs in the period 2007-13, and we estimated spending on the drugs for the period 2014-18. We identified 356 brand-name orphan drugs that were approved by the Food and Drug Administration in the period 1983-2013. While we included orphan drugs with both orphan and other indications, we adjusted spending to include only spending for orphan indications. In 2014 dollars, expenditures on orphan drugs totaled $15 billion in 2007 and $30 billion in 2013-representing 4.8 percent and 8.9 percent of total pharmaceutical expenditures, respectively. Our future trend analysis for the period 2014-18 suggests a slowing in the growth of orphan drug expenditures. The overall impact of orphan drugs on payers' drug budgets is relatively small, and spending on orphan drugs as a percentage of total pharmaceutical expenditures has remained fairly stable. Concerns that growth in orphan drug expenditures may lead to unsustainable drug expenditures do not appear to be justified.

Has The Era Of Slow Growth For Prescription Drug Spending Ended?

In the period 2005-13 the US prescription drug market grew at an average annual pace of only 1.8 percent in real terms on an invoice price basis (that is, in constant dollars and before manufacturers' rebates and discounts). But the growth rate increased dramatically in 2014, when the market expanded by 11.5 percent-which raised questions about future trends. We determined the impact of manufacturers' rebates and discounts on prices and identified the underlying factors likely to influence prescription spending over the next decade. These include a strengthening of the innovation pipeline; consolidation among buyers such as wholesalers, pharmacy benefit managers, and health insurers; and reduced incidence of patent expirations, which means that fewer less costly generic drug substitutes will enter the market than in the recent past. While various forecasts indicate that pharmaceutical spending growth will moderate from its 2014 level, the business tension between buyers and sellers could play out in many different ways. This suggests that future spending trends remain highly uncertain.

Pharmaceutical expenditure on drugs for rare diseases in Canada: a historical (2007-13) and prospective (2014-18) MIDAS sales data analysis.

BACKGROUND: Health Canada has defined rare diseases as life-threatening, seriously debilitating, or serious chronic conditions affecting a very small number of patients (~1 in 2,000 persons). An estimated 9 % of Canadians suffer from a rare disease. Drugs treating rare diseases (DRDs) are also known as orphan drugs. While Canada is currently developing an orphan drug framework, in the United States (US), the Orphan Drug Act (ODA) of 1983 established incentives for the development of orphan drugs. This study measured total annual expenditure of orphan drugs in Canada (2007-13) and estimated future (2014-18) orphan drug expenditure. METHODS: Orphan drugs approved by the US Food and Drug Administration (FDA) in the US were used as a proxy for the orphan drug landscape in Canada. Branded, orphan drugs approved by the FDA between 1983 through 2013 were identified (N = 356 unique products). Only US orphan drugs with the same orphan indication(s) approved in Canada were included in the analysis. Adjustment via an indication factoring was applied to products with both orphan and non-orphan indications using available data sources to isolate orphan-indication sales. The IMS Health MIDAS database of audited biopharmaceutical sales was utilized to measure total orphan drug expenditure, calculated annually from 2007-2013 and evaluated as a proportion of total annual pharmaceutical drug expenditure (adjusted to 2014 CAD). RESULTS: Between 2007 and 2013, expenditure was measured for a final N = 147 orphan drugs. Orphan drug expenditure totaled $610.2 million (M) in 2007 and $1,100.0 M in 2013, representing 3.3- 5.6 % of total Canadian pharmaceutical drug expenditure in 2007-2013, respectively. Future trend analysis suggests orphan drug expenditure will remain under 6 % of total expenditure in 2014-18. CONCLUSIONS: While the number of available orphan drugs and associated expenditure increased over time, access remains an issue, and from the perspectives of society and equity, overall spending on orphan drugs is lower relative to the number of patients affected with an orphan disease in Canada. The overall budget impact of orphan drugs is small and fairly stable relative to total pharmaceutical expenditure. Concerns that growth in orphan drug expenditure may lead to unsustainable drug expenditure do not appear to be justified.

Decline in economic returns from new drugs raises questions about sustaining innovations.

The sales and financial returns realized by pharmaceutical companies are a frequent topic of discussion and debate. In this study we analyzed the economic returns for four cohorts of new prescription drugs launched in the United States (in 1991-94, 1995-99, 2000-04, and 2005-09) and compared fluctuations in revenues with changing average research and development (R&D) and other costs to determine patterns in rewards for pharmaceutical innovation. We found that the average present values of lifetime net economic returns were positive and reached a peak with the 1995-99 and 2000-04 new drug cohorts. However, returns have fallen sharply since then, with those for the 2005-09 cohort being very slightly negative and, on average, failing to recoup research and development and other costs. If this level of diminished returns persists, we believe that the rewards for innovation will not be sufficient for pharmaceutical manufacturers to maintain the historical rates of investments needed to sustain biomedical innovation.