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Costly Hepatitis C Treatments Help Drive 12% Drug Spending Jump

Price of Sovaldi caught payers by surprise, expert says

After several years of modest increases, U.S. spending on medications is projected to increase by 12% this year, pushing the nation’s drug bill to between $375 billion and $385 billion, according to a report by the IMS Institute for Healthcare Informatics.

Several factors are driving the spending spike, including the introduction of expensive new hepatitis C drugs and fewer drug patent expirations than in previous years, the report found. Such expirations typically lead to savings as cheaper generics replace brand-name drugs.

The 11.7% rise is a dramatic departure from the more-modest average increases of 3.6% in annual drug spending during the past 5 years.

The report anticipates that the pace of spending increases will slow to 7% to 9% in 2015 as the impact of the new hepatitis C drugs declines, as less expensive biosimilar products become available, and as several brand-name drugs — such as the gastrointestinal cancer treatment Gleevec (imatinib mesylate, Novartis) and the antipsychotic agent Abilify (aripiprazole, Otsuka) — are replaced by generics.

Murray Aitken, executive director of IMS Health, expects that this “bubble of innovation” around hepatitis C will pass. “We think the spike in growth will moderate next year, and further moderate in 2016,” he said.

Drug costs are projected to increase between 3% and 5% in 2016. The new hepatitis C drug Sovaldi (sofosbuvir, Gilead Sciences), approved in December 2013, costs $1,000 per pill, with the price of a 12-week course of treatment running about $84,000. Another hepatitis C treatment — Harvoni (ledipasvir/sofosbuvir, Gilead Sciences), approved by the FDA in October 2014 –– costs $1,125 per pill, or $94,500 for a 12-week course of treatment.

An estimated 3 million to 4 million Americans have hepatitis C and are potentially eligible for treatment. Hepatitis drugs account for $8 billion of the approximately $40 billion in projected increased drug spending this year.

“The hepatitis C drugs are exhibit A when you look at escalating drug costs,” said Brian Henry, a spokesman for Express Scripts, the country’s largest pharmacy benefits manager. “You never had a drug that costs that much that can treat so many people.”

The price of Sovaldi “caught payers by surprise,” he said.

Innovative new therapies, especially in the area of cancer, have also pushed up costs. The Patient Protection and Affordable Care Act, which expanded access to health care and medications, may also have played a role, along with a new emphasis on preventive care and adherence to medications, Aitken said.

Holly Campbell, director of communications for the drug industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA), said the cost of developing drugs has skyrocketed, pointing to a report this week by the Tufts Center for the Study of Drug Development that estimated the price of bringing a drug to market at $2.6 billion. The process can take a decade, the report said.

“These most-recent findings underscore the ongoing challenges our industry faces,” Campbell said.

A report from the American Association of Retired Persons (AARP) noted the increase in the prices of brand-name drugs. The report found that the prices of 227 brand-name prescription drugs used by many older Americans increased by 12.9% on average last year, well above the 1.5% rate of inflation, bringing the average cost of a brand-name drug used regularly to $3,000.

“We have started to hear from members who have to decide between taking a drug they need and paying their electric bill,” said Leigh Purvis, director of health service research at the AARP Public Policy Institute and a co-author of the report.

But, she added, the impact goes beyond seniors. “This is a concern not just for our members, but for everyone.”

Source: Kaiser Health News; November 20, 2014.

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