More than 15 months after the U.S. declared that a public health emergency exists due to COVID-19, the health care sector is showing signs of rebounding. That’s according to the IQVIA Institute for Human Data Science report titled The Use of Medicines in the U.S.: Spending and Usage Trends and Outlook to 2025. But it’s certainly a mixed bag of news, and various services still could use some more improvement, observed industry experts at a recent webinar.
With the first eight weeks of 2020 as the baseline period, the institute found that in April 2020 there were deep declines in utilization across elective procedures; office, institutional and telehealth visits; institutional visits; office visits; screening and diagnostics; and new prescriptions, explained Michael Kleinrock, research director at the IQVIA Institute for Human Data Science and principal author of the report, during a July 15 webinar. “Elective procedures were down 85% at the peak, and office, institutional and telehealth visits combined were down about 50%,” with telehealth substantially filling a gap during that period.
Kleinrock pointed out that “there was a deep impact where shutdowns were effective,” but the greater concern is that “we have not rebounded above 100% since the return to normalcy. That leaves the potential that there are numbers of patients — potentially in the millions — who are underserved in some way due to their lack of engagement with the health system, and their health status or health outcomes could be worse.”
“Before the pandemic, telehealth visits were about 1% of the combined office, institutional and telehealth visits but represent about 9%, 10% today,” said Kleinrock.
Longer Prescriptions Increased
A trend that accelerated in 2020 was the “use of longer prescriptions. We have over a number of years seen many, many patients and providers shifting to 90-day prescriptions,…and in terms of the percent of chronic prescriptions that are now dispensed as a three-month supply, we were at 58% at the end of 2020. If you go back four years, that was only 44%, so a significant amount of the chronic market [is] getting these prescriptions, which has in effect mitigated the disruptions to their ability to get to a pharmacy while they were shut down. That’s definitely a significant driver of why we’ve seen medicine demand remain robust during 2020.”
The report also noted that there was an “increasing gap” between invoice level spending and drugmaker net revenues. From 2015 to 2020, medicine spending increased 0.8% on a net price basis to $359 billion. “Essentially the net revenue growth has been much lower,” said Kleinrock. “The level currently is about a third below, including all brands and generics, the overall invoice level.”
New products contributed almost $62 billion to that manufacturer net revenue growth, followed by protected brands volume, which added more than $51 billion, protected brands price at more than $8 billion and generics at almost $4 billion. But it was offset by a decline of more than $78 billion due to losses of exclusivity (LOE).
From 2015 to 2020, there was “steady brand growth; the protected brand price growth had been relatively low and shifted in 2020 to be a decline of almost $10 billion,” he explained. “Protected brands volume has continued to grow. Part of that is that newer brands during this period stopped being new after the first two years,…and as a result, some products have continued to grow into their midlife. Loss of exclusivity has been a relatively consistent negative and getting a little larger, particularly this year with biosimilars, which has been a very important and welcome evolution from the biosimilar pathway coming in with the Affordable Care Act a decade ago and finally starting to see some really impactful results.” Over the period, generics had “relatively little contribution” to net revenue, “as there have been some price and volume dynamics that offset each other there.”
Oncology Biosimilars’ Use Is Rising
He flagged biosimilars for three oncology therapies — trastuzumab, bevacizumab and rituximab — as picking up about 60% of the share of days of therapy in the 15 months since they were introduced. “That newer, more rapid uptake is certainly notable and gives one a great deal to think about as we go forward to the next round in the future of biosimilars and their potential impact on savings,” he said. “And this is early days. If we cast our minds back to the early ’80s, the introduction of the generic dynamic with Hatch-Waxman took some time to get rolling, and this is certainly moving in an interesting and exciting way for the next few years.”
Patient cost exposure can drive adoption of new drugs, and the report found that for all brand and generic prescriptions, 99.1% have out-of-pocket costs below $125, and 92% have OOP costs below $20. “So the vast majority of prescriptions are very inexpensive, although affordability can be a problem at any price level,” Kleinrock observed. For brands only, 98.6% of prescriptions have an OOP cost of less than $125, and 74% are less than $20 OOP, which is “a different dynamic, but still most things are relatively inexpensive.
“What we see, though, is that when you are faced with a cost as a patient, there is a dynamic we call abandonment, and that’s where the patient’s prescription has been filled, waiting for them to come get it at the pharmacy, and they don’t take it home,” he continued. “And what we see is when their cost exposure is very high, over $250, 56% of them do not take that prescription home, and that’s 9% total….These are new-to-the-product prescriptions, so it represents a dynamic that applies to refills as well, but often that new start is the point at which a patient obviously doesn’t have an option to continue because they’ve stopped. That’s 55 million prescriptions across all of these, and 23 million of them were in the less-than-$10 basket. So it’s not always the most impactful is the highest cost — there’s definitely an impact here, but there’s a question about affordability that is more nuanced than we are talking about when we only focus on high costs.”
Spread Between Invoice, Net Is Growing
As far as the outlook over the next five years for the U.S. medicine spending forecast, “we’re seeing an increase in that spread between the invoice and net,” he stated. “We’re seeing an overall net spending growth in the zero to [3%] range, again remaining at these historically low levels. As much of the dynamics in the outlook are based on innovation in some therapy areas, the continued flow of losses of exclusivity and biosimilars’ relatively low price growth on a continuous basis.”
Areas seen as growth drivers include oncology, immunology and neurology. “These are areas that have a significant amount of innovation, that are still flowing,” said Kleinrock. “Immunology had been growing close to 20% in the past five years, slowing now into the mid-teens with the expectation of major biosimilars,” a dynamic also causing oncology to slow a bit. “But at the same time, [we are] expecting nearly 100 active new substances in oncology with a whole range of indications. Neurology is certainly a very dynamic area and an expectation of significant upside from this perspective should” there be more development in areas like Parkinson’s and Alzheimer’s.
Asked to respond to the findings, John Michael O’Brien, Pharm.D., president and CEO of the National Pharmaceutical Council, replied that “there are three things that jump out to me. The first is that the evidence shows that increasing drug prices are not the primary source of overall health spending increases. A fraction of the drug spend increase is attributable to rising prices, and net price growth has been less than inflation for the last three years, with net prices actually declining in 2020.” He also noted the $78 billion in savings between 2015 and 2020 due to LOE, as well as the “continued growth in biosimilar utilization….I think that biosimilars have the potential to provide significant financial savings in the future.”
Abandonment Continues to Be Issue
Second, “we create too many barriers for patients accessing their medicines,” he maintained. “Fifty-five million abandoned prescriptions to me as a pharmacist is really sad. That’s terrible for patients’ health, and I believe that health insurance designs, specifically high-deductible health insurance plans, is what leads to high patient out-of-pocket costs, really hindering patient access to high-value care.”
Noting the institute’s focus on evidence, O’Brien asserted that “if we misread the data or fall victim to the misleading rhetoric that assures us there are seemingly simple fixes, that can have devastating consequences for patients. Our research shows that physicians attribute over half of the improvement in outcomes for some eight leading causes of morbidity and mortality to medications, higher than any other category of interventions. Harvard researchers found in Health Affairs that about 35% of the three-year improvement in life expectancy could be explained by medications — almost three times more than any other medical intervention. I really believe that innovation matters, and our research from earlier this year shows the effect that pharmaceutical-only budget caps can have on leading to worse outcomes in global budgets.”
Also speaking at the webinar, Rena Conti, an associate professor at Boston University, called attention to “a couple of really important pieces of good news. First is the biosimilar market appears to be evolving, there appears to be consequential entry, and prices appear to be coming down. We expect that this will continue to evolve, and to the extent that this promise will continue, I think that we will see savings for insurers and also patients over time.
“The second piece of really good news is out-of-pocket costs,” she continued. “It appears that they are very low for the majority of patients using the vast majority of prescriptions out there, not only in the generic space, for which we know generic prices are quite low in the U.S., but also in branded products as well.
“One last piece of good news…is the rebound in supplies,” she continued. “It’s actually an incredible statistic, given the amount of public worry on the resiliency of our supply chain in the pharmaceutical market during the pandemic. As many of you know, many of our products that are used most commonly, including the generics, are sole source or manufactured overseas, so the fact that demand has actually rebounded, and supply appears to also have rebounded suggests that our supply chain is much more resilient than some reports might suggest.”
She added that there also were a few “slightly worrisome” findings. First is that “there appears to be not a lot of savings associated with the generics market in that the level is high in terms of savings, but the market doesn’t appear to be evolving in a way that is generating more savings over time. The second is that we need to know more about the biosimilar market and specifically what entry is occurring and to what extent in specific markets and to what extent that is really driving savings for individuals. And the last thing I look forward to learning more about is the sourcing of particular products, specifically generics and also essential drugs. In the past 18 months, we’ve been worried about certain suppliers and a lack of FDA inspections on foreign suppliers, which also is cause for concern, so learning more about where these products are made and where our vulnerabilities lie is going to be incredibly important.”
Noting the net vs. list price dynamic, Ronna Hauser, vice president of pharmacy affairs at the National Community Pharmacists Association (NCPA), said, “I think these struggles to find how we pass those savings onto patients will only grow. And that’s one area that NCPA has been involved in for years, especially on the Medicare Part D side: getting these savings to patients at the pharmacy counter and making sure they’re not utilized in other ways. We want to lower those patients’ drug costs.” The findings on out-of-pocket costs “in one way is enlightening and hopeful, but in another way, we do see abandonment all too common. Finding ways to decrease abandonment, finding ways to make sure that pharmacy access is not impeded and finding ways to ensure that patients can get the care from their pharmacies where and when they’d like to…will continue to be vital. So figuring out ways to use your benefit the best way possible and that these dynamics we see with cash discount cards, etc. that are growing, figuring out the right balance between using the pharmacy benefit or a patient coming up to the counter and saying, ‘I can’t afford that price with my insurance; what can you offer me?’ has become all too common.”
According to Krutika Amin, Ph.D., associate director of the Program on the Affordable Care Act for the Kaiser Family Foundation, “the fact that the lower-than-expected utilization has persisted suggests that care that didn’t happen last year may be forgone rather than delayed. Prescription drug utilization seems to have mostly been spared in this regard, particularly for chronic conditions and medications, which is good news, though the dropping inpatient and physician visits and also preventive screenings do raise questions about diagnoses. Some of the care that was missed earlier in the pandemic may have been for acute conditions that resolved on their own or chronic conditions that were managed with less service intensity or with telehealth. But in other cases, how the missed care will affect our outcomes in the future remains to be seen.”
She noted that “the missed care could affect hospital financials and also insurer financials. The provider relief funds last year may have somewhat protected hospital financials, and even if there is pent-up demand on the provider supply side, with the [reductions] in workforce, there may continue to be delays. On the insurer financials, we saw the drop in the utilization meant lower medical loss ratios and higher margins, and it looks like insurers may continue to have higher gross margins this year, though for patients, insurance premium affordability has improved with the COVID release passed earlier in the year.”
In addition, “affordability at the point of care continues to be a concern,” she observed, adding that the average out-of-pocket spending “somewhat masks spending among the sickest, the smallest slivers, and when we’ve looked at survey data, the top percent of drug spenders end up having higher spending, and the spending is concentrated in that way, so even for people in the privately insured market, there are out-of-pocket limits for drugs and services. But if it’s not covered by the plans, then the patient is liable for the whole cost, and so the out-of-pocket, point-of-sale costs remain a concern for patients. With the 2022 insurer filings that we’ve been following, actuaries are expecting utilization to revert to the pre-pandemic levels, but it will be interesting to watch how utilization shakes out and reaches some kind of equilibrium in the post-pandemic world.”