prescription medicines: costs in context -...
TRANSCRIPT
Prescription Medicines:Costs in Context
2018
2
Then Now
We are in a new era of medicine where breakthrough science is transforming care with innovative treatment approaches...
Medicines made of chemical compounds
Medicines treat broad diseases
Radiation and chemotherapy to treat cancer
Medicines made from living cells
Medicines targeted to specific patient based on genetic makeup
Immunotherapy that harnesses body’s own immune system to fight disease
CAR T-cell therapy
CRISPR
Prescription Medicines: Costs in Context www.phrma.org/cost
3
Treating people with one or more chronic condition consumes 90 cents of every dollar spent on health care.
…and enabling us to more effectively treat chronic disease, the biggest cost driver.
Prescription Medicines: Costs in Context www.phrma.org/cost
Prevalence and Spending by Number of Chronic Conditions (2014)
PER
CEN
TAG
E
Total population
Total expenditures
12%
41%16%
26%
31%
23%
10%
40%
Number ofchronic conditions
5+
3 – 4
1 – 2
0
Note: Total health care spending defined as the amount spent on all outpatient and inpatient health care services across all payers, including out of-pocket payments.
Health Care Spending by Number of Chronic Conditions (2014)
AVER
AGE
ANN
UAL
SPE
ND
ING
PER
PER
SON
IN D
OLL
ARS
Number of Chronic Conditions
Note: Total health care spending is defined as the amount spent on health care services across all payers, including patient out-of-pocket payments.
Other
Home health
Prescription
ED
Office and outpatient
Inpatient
Source: RAND Corporation
4
In the midst of this incredible progress, medicine cost growth is declining.
Prescription Medicines: Costs in Context www.phrma.org/cost
3.8%
1.5%
2016
2017
3.2%
1.9%
2016
2017
3.9%
0.6
2016
2017
Note: IQVIA data is reflective of retail and physician-administered medicine spending.
5
In fact, after discounts and rebates, brand medicine prices grew just 1.9% in 2017.
Source: IQVIA. Medicines use and spending in the U.S.: a review of 2017 and outlook to 2022. Published April 2018. Accessed April 2018.*Includes protected brand medicines only (ie, brand medicines without generic versions available in the year indicated).**Net price growth reflects impact of off-invoice rebates and discounts provided by manufacturers.
Estimated Net Price Growth**Invoice Price Growth
Prescription Medicines: Costs in Context www.phrma.org/cost
6
Spending on retail and physician-administered medicines continues to represent just 14% of spending…
8%
12%
14%
18%13%
4%
31%
Admin Costs
Home Health & Nursing Home Care
Prescription Medicines
Physician & Clinical Services
Other**
Dental Services
Hospital Care
U.S. Health Care
Spending, 2015
Source: PhRMA analysis of CMS National Health Expenditures data, Altarum Institute study and Berkley Research Group study.**Supply chain entities- stakeholders involved in bringing medicines from manufacturer to patient, including wholesalers, pharmacies, PBMs and healthcare provider locations.
Prescription Medicines: Costs in Context www.phrma.org/cost
7
Dental Services
Other
Prescription Medicines
Government Administrative Costs
Physician and Clinical Services
Home Health and Nursing Home Care
Hospital Care12%
32%
34%
2%3%
…and a small share of total Medicaid spending…
TOTAL$545B
Note: Prescription drug data is net of rebates and includes both retail and non-retail drugs. Data used were predominantly derived from CMS 64 reports. Pre-rebate expenditures were tabulated using FY2015 CMS State Drug Utilization data files and CMS brand/generic indicators for each NDC.
Source: CMS National Health Expenditure Data and Altarum Institute.
Prescription Medicines: Costs in Context www.phrma.org/cost
11%
7%
8
…and is projected to grow in line with health care spending through next decade.
Note: Total retail sales include brand medicines and generics.Source: Centers for Medicare & Medicaid Services (CMS).
Prescription Medicines: Costs in Context www.phrma.org/cost
Perc
ent A
nnua
l Gro
wth
Rat
e
Health Care Retail Prescription Medicines
9
At the same time, growth in other health care services will be 5 times total medicine spending growth through next decade.
Source: CMS National Health Expenditures Report, December 2017Source: Altarum Institute. "Projections of the prescription drug share of national health expenditures including non-retail." May 2018.
Other Health Care Services(10-year cumulative increase: $1,958 billion)
Total Prescription Drug Expenditures(10-year cumulative increase: $401 billion)
Prescription Medicines: Costs in Context www.phrma.org/cost
Projected Cumulative Growth in Spending (in millions), 2017–2026
5x
10
Insurers and PBMs have a lot of leverage to hold down medicine costs.
Negotiating power is increasingly concentrated amongfewer pharmacy benefit managers (PBMs).
Top 3Market Share:
71%
22%
25%
24%
29%
OptumRx (UnitedHealthGroup)
CVS Health (Caremark)
Express Scripts
All Other
Prescription Medicines: Costs in Context www.phrma.org/cost
Insurers determine:
FORMULARYif a medicine is covered
TIER PLACEMENTpatient cost sharing
ACCESSIBILITYutilization management through prior authorization or fail first
PROVIDER INCENTIVESpreferred treatment guidelines and pathways
Source: Drug Channels Institute, February 2018.
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In fact, more than 1/3 of the list price is rebated back to payers, the government and other stakeholders in the supply chain.
Prescription Medicines: Costs in Context www.phrma.org/cost
Rebates, discounts, fees and other price concessions have more than
doubled since 2012
Brand companies retain just 63% of list price spending on medicines
62.6%18.5%
12%
6.9%
Brand CompaniesMarket Access Rebates and DiscountsStatutory Rebates and FeesSupply Chain Entities
Source: Berkeley Research Group. Fein AJ; Drug Channels Institute
2012 2017
$74B
$153B
12
Hospitals also benefit from misaligned incentives in the supply chain.
An analysis found that 320 hospitals mark up some medicine prices at least 1000%
Nearly one in five hospitals marks up medicine prices to 700% or more of their acquisition cost
If a hospital purchased a medicine for $150, a 700% markup could result in patients being billed $1,050 for that medicine
Amount paid by hospital
Amount billed by hospital
$1,050
$150
1000%
Source: The Moran Company. Hospital Charges and Reimbursement for Medicines: Analysis of Cost-to Charge Ratios. September 2018.
13
90% of all medicines dispensed in the United States are generics.
Source: IMS Health.Source: Generic Pharmaceutical Association, “Generic Drug Savings in the U.S. Report,” 2018.
$1.79trillion 10-year savings
(2008-2017)
Prescription Medicines: Costs in Context www.phrma.org/cost
90%88%
72%
52%
33%43%
19%
1984 1990 1996 2002 2008 2014 2017
14
Generics cost a fraction of the price of the initial brand medicine.
Note: Figures represent the average annual price for 30 pills of the most commonly dispensed form and strength. "Then” price represents the average price in the year prior to generic entry. “Now” price represents the average price in December 2017.Source: IQVIA Institute for Human Data Science analysis for PhRMA. May 2018.
-92%
-93%
-98%
-96%
-98%
Prescription Medicines: Costs in Context www.phrma.org/cost
Medicine
DIOVAN VCT®
Hypertension (2010)
LIPITOR®
Cholesterol (2010)
PLAVIX®
Blood Thinner (2011)
SEROQUEL®
Schizophrenia (2010)
ZYPREXA®
Schizophrenia& (2010)Bipolar Disorder
% Change
Brand Name THEN Generic NOW
$87
$85
$166
$87
$393
$7
$6
$4
$2
$17
15
Competition from generics and biosimilars is expected to reduce U.S. brand sales by $105 billion from 2018 to 2022.
2013-2017: $74 BillionProjected
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
2018-2022: $105 Billion
-$17
-$12-$15 -$14
-$16
-$26
-$19 -$18-$17
-$26
Source: IQVIA. Medicines use and spending in the U.S.: a review of 2017 and outlook to 2022. Published April 2018. Accessed April 2018.
16
At the same time, innovator companies race to be the first to market with a new medicine.
Time Between Approval of First and Second Medicines in a Therapeutic Class Has Declined Dramatically
Competing brands generally launch within years
10.2years
1970’s 2.3years2005-2011
Prescription Medicines: Costs in Context www.phrma.org/cost
Source: Tufts Center for the Study of Drug Development (CSDD).
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For example, American patients have access to cancer medicines about two years earlier.
The competitive U.S. market provides patients with access to innovative medicines faster.
22
15
10
10
10
10
10
21
17
17
15
13
7
4
0 5 10 15 20 25 30 35 40 45 50
Taiwan
Australia
Spain
Italy
United Kingdom
France
Germany
Months
Delay in cancer medicine approval and reimbursement, 2010-2014
Delay Between U.S. Approval and Country-Specific Approval Delay Between Country Approval and Reimbursement
17
23
25
27
32
43
14
Prescription Medicines: Costs in Context www.phrma.org/cost
Source: PhRMA analysis of IMS Consulting Group “Patient Access to Innovative Oncology Medicines Across Developed Markets.” June 2016
18
Nearly 90% of newly launched medicines from 2011 to 2017 were available in the United States, compared to just two-thirds in the UK, half in Canada and France, and one-third in Australia.
More medicines are available to U.S. patients.
Number of New Medicines Available by Country*(of 220 drugs launched 2011-2017)
Note: New Molecular Entities (NME) approved by the FDA. European Medicines Agency (EMA) and Japan’s Pharmaceuticals and Medical Devices Agency (JPMDA), and launch in any country between 2011-2017Source: PhRMA analysis of IQVIA Analytics
Prescription Medicines: Costs in Context www.phrma.org/cost
USA Germany UK Japan Canada France South Korea Australia New Zealand China
192
156147
108 106 106
80 73
3217
87%
71%67%
49% 48% 48%36% 33%
15% 8%
For example, of the 14 newdiabetes medicines
launched over the period,only one
was available in France.
19
Spending on prescription medicines is a small percentage of total health care spending around the world.
Note: Total health care spending includes hospital care, physician and clinical services, home health and nursing home care, government administration and net cost of private health insurance, dental, home health and other professional services as well as durable medical equipment.Source: OECD Health Statistics Database (accessed February 2016); Altarum Institute, 2015, A ten year projection of the prescription drug share of national health expenditures including non-retail.
Prescription Medicines as a Percentage of Total Health Care Spending
14% Canada
14% USA
11% UK
13% France
13% Germany
15% Italy
12% Spain
16% Japan
10% Australia
16% Korea
Prescription Medicines: Costs in Context www.phrma.org/cost
20
Patients in the United States are facing rising out-of-pocket costs and other barriers to care.
The use of four or more cost-sharing tiers is becoming more common on employer plans
Percent of plans with deductibleson prescription drugs
23%
52%
2012 2017
Source: PWC, Health and Well-Being Touchstone Survey, various years
Prescription Medicines: Costs in Context www.phrma.org/cost
2004 2006 2008 2010 2012 2014 2015 2016 2017
3%5%
7%
13% 14%
20%23%
32%
44%
21
Cost sharing for nearly 1 in 5 brand prescriptions is based on list price
More than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price
And too often negotiated savings do not make their way to patients.
Prescription Medicines: Costs in Context www.phrma.org/cost
44%
26%
29%
55%
Copay
Deductible
Coinsurance
Source: IQVIA. May 2018.
22
Certain commercially insured patients could save $145 to more than $800 annually.
Sharing negotiated discounts with patients would increase premiums about 1%.
NOTE: Plan cost includes medical and pharmacy claims*HDHP = High-deductible health plan
Prescription Medicines: Costs in Context www.phrma.org/cost
Change in Plan Costs with Shared Rebates
PLAN TYPE
Traditional PPO Copay HDHP* Coinsurance HDHP
Net Plan Per Member Per Month Spend $433.91 $374.41 $372.89
Change in Plan Costs $ $0.82 $2.62 $3.84
Change in Plan Costs % 0.2% 0.7% 1.0%
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And
20%of revenues are reinvested
into R&DNOTE: The remaining 57% share of business R&D spending is conducted by other industries, including subsectors of the machinery sector, the computer and electronics products sector, and the electrical equipment, appliance, and components sector.Source: Research!America report and PhRMA analysis of National Science Foundation data.
Industry invests 17% of all domestic research and development funded by U.S. businesses
Invested about
$90 Billion in R&D in 2016
Prescription Medicines: Costs in Context www.phrma.org/cost
Biopharmaceutical companies use today’s revenues to invest in tomorrow’s treatments and cures.
Phamaceuticals & Medicines
Software Automobiles Aerospace Computer Systems Design
Scientific R&D Services
24
On average, it takes more than 10 years and $2.6B to research and develop a new medicine.
BETWEEN 1998 AND 2014
Unsuccessful Attempts
Successful Attempts
123Alzheimer’s Disease
96Melanoma
167Lung Cancer
4Alzheimer’s Disease
7Melanoma
10Lung Cancer
Just
12% of drug candidates that enter clinical testing are approved
for use by patients
Source: Tufts Center for the Study of Drug Development (CSDD).Source: Pharmaceutical Research and Manufacturers of America (PhRMA), “Researching Alzheimer’s Medicines: Setbacks and Stepping Stones,” 2015.Source: Pharmaceutical Research and Manufacturers of America (PhRMA), “Researching Cancer Medicines: Setbacks and Stepping Stones,” 2014.
Prescription Medicines: Costs in Context www.phrma.org/cost
We need a public policy environment that recognizes and rewards risk taking.
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PROMOTE VALUE-DRIVEN HEALTH CARE• Remove barriers restricting information companies can share with insurers.• Reform regulations discouraging companies from offering discounts tied to outcomes.• Modify Medicaid best price requirements.
MODERNIZE THE DRUG DISCOVERY AND DEVELOPMENT PROCESS• Modernize the FDA to keep pace with scientific discovery and increase efficiency of generic approvals• Promote and incentivize generic competition.
EMPOWER CONSUMERS AND LOWER OUT-OF-POCKET COSTS• Provide patients with access to negotiated rebates. • Address affordability challenges in the deductible.• Make more information on health care out-of-pocket costs and quality available to patients.
IMPROVE TRADE AGREEMENTS• Enforce existing trade agreements.• Ensure new trade agreements recognize value of innovative medicines.
Prescription Medicines: Costs in Context www.phrma.org/cost
ADDRESS MARKET DISTORTIONS• Address burdensome regulations that distort programs like the 340B Drug Pricing program.
Collectively, these market-based reforms can make medicines more affordable and accessible.