Growth in retail drug spending freefalls along with hepatitis C drug costs, analysis says

Drug pricing has been under a microscope in recent years as policymakers, market watchers and others look to determine what's sending costs upward. But a new report says retail spending on pharmaceuticals grew at a much slower rate last year than in recent history.

Retail prescription drug spending hit $328.6 billion in 2016, up 1.3% versus 2015, according to a new analysis by the Office of the Actuary at the Centers for Medicare & Medicaid Services. The figure pales in comparison to 12.4% spending growth in 2014 and 8.9% in 2015.

What caused the deceleration? According to the agency, it was a decrease in hepatitis C costs—market watchers will remember Gilead's supersuccessful Sovaldi and Harvoni rollouts—fewer new drug launches, and a moderation in price hikes for both branded and generic drugs. Health Affairs published an abstract on the analysis Wednesday afternoon.

Overall healthcare spending grew 4.3% last year to $3.3 trillion. According to the report, the office has seen large fluctuations in drug spending growth in recent years, but pharmaceuticals are still about 10% of overall health spending.

That last finding is a point the industry can cite to argue that drug costs aren't growing out of control. At a lively drug pricing discussion with Regeneron CEO Len Schleifer last year, Pfizer CEO Ian Read made the same argument. He said the "total cost of drugs as a percentage of healthcare has not changed in two decades."

In addition to spending fluctuations due to new drug launches, the new analysis shows that pharma priced with more restraint in 2016 amid an intense controversy. Many top drugmakers committed to only increasing prices once a year and at single-digit percentages.

The analysis backs up findings from QuintilesIMS earlier this year. In May, the group published a report that concluded U.S. net drug spending grew 4.8% in 2016, to $323 billion. That was moderate relative to the 8.9% spending growth in 2015 and a 10% leap in 2014.

Despite a lengthy drug pricing firestorm, pharma has dodged meaningful action on the issue from lawmakers in Washington, D.C. Members in Congress have talked up numerous proposals to curb drug costs, but none have gained traction. Instead, several states are taking aim at the issue, and the FDA is working on its own strategies to bring down costs.

HHS secretary nominee Alex Azar, a former Eli Lilly executive, has said he'd like to increase competition and fight "gaming" of regulations by pharmaceutical companies to tackle costs. Both are strategies FDA Commissioner Scott Gottlieb, M.D., has worked to implement.

Dec 6, 2017

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