Total spending on medicines is forecast to reach $1.5 trillion by 2021, up 33% from 2016 levels, even as annual growth moderates from the record pace set in 2014 and 2015, according to new research released by the QuintilesIMS Institute. While historically large numbers of high-quality new medicines will emerge from the R&D pipeline in the next five years, pricing and market access pressures, lower volume growth in pharmerging markets and greater savings from patent expiries will contribute to the lower rate of growth.
The report, Outlook for Global Medicines Through 2021: Balancing Cost and Value, found that medicine spending will grow at a 4-7% compound annual rate during the next five years, down from the nearly 9% growth level seen in 2014 and 2015. The total global spend for pharmaceuticals through 2021 will increase by $367 billion on a constant-dollar basis. Spending is measured at the ex-manufacturer level before adjusting for rebates, discounts, taxes and other adjustments that affect net sales received by manufacturers. The impact of these factors is estimated to reduce growth by $127 billion, or approximately 35 percent of the growth forecast through 2021.
“The outlook for medicine spending growth reflects a more sustainable level for health systems, following the unexpectedly high growth seen in recent years,” said Murray Aitken, senior vice president and executive director of the QuintilesIMS Institute. “At the same time, the astonishing level of scientific advances for disease treatments inevitably will place ongoing pressure on funding for medicines—requiring value-based assessments that balance patient needs and pricing levels with competing healthcare priorities.”
In its latest study, the QuintilesIMS Institute highlights the following findings:
- Global medicine spending will reach nearly $1.5 trillion through 2021 on an invoice price basis, rising 4-7% CAGR. Growth in spending will slow from nearly 9 percent in 2014 and 2015—a growth rate driven in part by new hepatitis and cancer medicines that will have less impact through 2021. Most global spending growth, particularly in developed markets, will be fueled by significant innovations in oncology, autoimmune and diabetes treatments. The U.S. will continue as the world’s largest pharmaceutical market, contributing 53% of forecasted growth over the next five years, while China will continue as the second largest market contributing 12% of the growth.
- New drug launches will reach historically high levels in the next five years. More than 2,000 drugs in the late-stage pipeline will yield an expected 45 new active substances (NAS) on average annually through 2021. The new medicines will address significant unmet needs across a wide range of disease areas, including cancer and autoimmune, metabolic and nervous system disorders. The sheer number of cancer treatments, their potential combinations in treatment regimens and the variety of companies involved in development will bring significant complexity to the patient care landscape during the next five years. Dramatic improvements in survival and tolerability are expected and will be accompanied by substantially greater levels of clinical trial and real-world information in support of treatment decisions.
- Single-digit spending growth is forecast for the U.S. market. The U.S. market growth rate will decline by half, from 12% in 2015 to 6-7% this year, with 6-9% growth forecast through 2021 on an invoice price basis. The decline reflects the end of Hepatitis C treatment-driven growth and greater impact of patent expiries—including the introduction of biosimilars—following a period in which fewer brands faced new generic competition. U.S. growth in 2014 and 2015 also was driven by historically high price increases for both brand drugs and generics on an invoice-price basis before the impact of off-invoice discounts and rebates. After adjusting for price concessions by manufacturers, spending growth is estimated to be more than 2 percentage points lower through 2021 and 4 percentage points lower in 2016—a 4-7% CAGR on a net-price basis.
- European payers are expected to maintain tight constraints on drug budgets. Forecasted low pre-rebate and discount growth of 1-4% in the EU5 countries through 2021 reflects policymaker responses to unexpectedly high new drug spending in 2014 and 2015, and relatively weak economic growth in the region. The Hepatitis C drugs were surprising to stakeholders in their effectiveness, the extent to which patients and providers were willing to use them, and the budget impact that few were able to accurately predict. Looking forward, these budgeting weaknesses are expected to prompt European payers to redouble their efforts to bring predictability to their budgeting processes for drugs. The impact of BREXIT on the U.K. pharmaceutical market is expected to be modest, driving at most a 1.5% slower growth rate.
- Lower economic growth triggers slower expansion for medicine use in pharmerging markets. Leading pharmerging markets have seen real GDP growth slow from 1-4 percentage points over the past decade. This has triggered a corresponding reduction in medicine volume growth, from an average of 7% annually over the past five years to 4% forecast through 2021. China, in particular, will see a decline in annual volume growth from 17% to 4% over the same period. Overall, volume growth continues to be driven by non-original products that account for 91% of the volume in pharmerging markets. The outlook for spending growth across these markets is expected to moderate from 10% CAGR over the past five years to 6-9% through 2021.
