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Drug spending in developed countries has seen remarkable changes in recent years. Shifting regulations, the introduction of innovative drugs, patent expiries, and increases in healthcare spending are just a few of the trends that have effected drug expenditure in the past 20 years.

In our newest QuintilesIMS Institute report, Understanding the Dynamics of Drug Expenditure: Shares, Levels, Compositions and Drivers, we unpack these trends, exploring how they have impacted the healthcare systems in France Germany, Japan, the United Kingdom (UK) and the United States (US) over the past 20 years. The report details which therapy areas are on top, where there have been declines, and where dramatic shifts can help tell a larger story.

While each country has a distinct set of drivers based on underlying clinical and regulatory issues, many patterns did emerge.

End of an era

In the late 90s, the proliferation of blockbuster drugs altered the composition of drug expenditure, particularly in developed countries. From 1995-2000, most of these countries saw increases in total drug expenditures as blockbuster drugs became widely available. That also increased overall spending. Since the mid-90s, the share of total health expenditure attributed to drugs in these five countries has remained relatively consistent. However, as those blockbuster drugs lost patent protection, the types of drugs driving spending rather than gaining traction has shifted. Therapies that once dominated spending became dramatically less important, while other entirely new therapies take on a growing share of spending.

  • In Germany, for example, innovative new treatments in areas including oncology, autoimmune, and viral hepatitis have seen dramatic spending increases, while older categories that were once market leaders -- including antibacterials and cardiovascular drugs -- are now dropping off. This is driven in part by a lack of innovation in these therapy areas, which has resulted in fewer new drugs coming to market.
  • In Japan, the volume of mental health drugs has nearly doubled in 20 years as medical practice shifted to address mental health differently in the country. Meanwhile, older drugs past their patents have seen rapid declines as new government policies promote use of generics.
  • In the US, newer treatments for small populations like cancer, autoimmune diseases, multiple sclerosis, HIV and hepatitis C have become much larger shares of spending in recent years, while larger population treatments like hypertension, antibacterials, antiulcerants and mental health drugs have become dramatically smaller share of spending as products have lost patent protection and costs have reduced.
  • The introduction of novel, direct-acting antiviral therapies for hepatitis C in 2013, has also had a profound impact on spending across all five countries. The superior outcomes and convenience of these new therapies lead to rapid expansion of the number of patients receiving treatment, contributing to historically high levels of expenditure growth in this therapy category.

The impact of generics and loss of exclusivity

Over the past five years, sales of existing, protected, branded drugs accounted for 45-65 percent of total drug expenditure in these countries, contributing approximately $10Bn to growth annually. Meanwhile, brands that are no longer protected make-up 7-35 percent of expenditure. This gap reflects different policies affecting usage and reimbursement of no longer protected brands and generics in each country.

If you look at nominal drug expenditure using invoice prices, spending over the past 20 years has risen substantially across all five countries. However this impact becomes less significant when the numbers are normalized for economic and population growth, especially in the most recent decade.

Drug spending also hasn’t risen as rapidly as a percentage of health expenditure overall. Indeed, for some countries it has declined from peaks in the late 1990s. For example, France’s drug spend declined from 13.2% in 2000 to less than 10 percent in 2015l and in the U.K. spending declined from 11.6% to 9.7% in the same time frame.

These are just a few of the insights and data points readers will find in this latest report, which is available at www.quintilesimsinstitute.org. Along with a detailed analysis of drug expenditure trends by drug class and country, it delves into the unique healthcare policies and therapy areas that have the biggest impact, and offers perspective on how these trends will shape drug spending in the years to come. 

 

Topics in this blog post: Healthcare Cost, Population Health, Biopharma