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Developing IQVIA’s positions on key trends in the pharma and life sciences industries, with a focus on EMEA.
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EMEA Thought Leadership
Developing IQVIA’s positions on key trends in the pharma and life sciences industries, with a focus on EMEA.
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Middle East & Africa
EMEA Thought Leadership
Developing IQVIA’s positions on key trends in the pharma and life sciences industries, with a focus on EMEA.
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Drug Expenditure Dynamics 1995–2020: Understanding medicine spending in context
Oct 14, 2021
Summary
While the level of drug expenditure is closely watched and often commented upon, the composition of that expenditure and its dynamics are not as well understood. Typically, official statistics of drug spending only include drugs dispensed in pharmacies and do not include drugs used in hospitals, an issue which raises questions about their representativeness of total drug spending.
In this report, for the first time, we have included estimates of total drug spending, including hospitals and net of discounts and rebates. These estimates have been based on official statistics from government agencies in the countries where available, in some cases not previously published internationally.
Key messages in the report:- While the level of drug expenditure is closely watched and often commented upon, the composition of that expenditure and its dynamics are not as well understood.
- The changes in drug spending over the past quarter century have been dramatic in terms of the types of medicine and the diseases they are used to treat.
- But drug spending as a share of healthcare spending has changed to a lesser degree and has represented greater stability than one might have expected.
- In every country studied, drug spending is a small proportion of healthcare spending, averaging 15% (and ranging from 9–20%) and has remained relatively flat over the last 20 years, even though the reliance on pharmaceuticals has increased.
- The cycle of genericization has continued across therapeutic classes, including cancer; and the impact of biosimilars is now also seen.
- The result of these long-term trends is that medicine utilization has grown over time, driven primarily by increased use of generics.
- While new medicines are often seen as large drivers of growth, in context each era has different leading classes, and the recent waves of innovation in oncology, diabetes, and immunology mirror the impact of anti-bacterials, cardiovascular and gastrointestinal treatments which drove spending a quarter century ago.
- As an example, the significant bolus of spending for Hepatitis C from 2013 has largely come and gone, and further illustrates relatively stable long-term trends.
Key Findings
HEALTH AND MEDICINE SPENDING TRENDS
Total drug spending averages 15% of healthcare with countries ranging from 9-20%
- Drug spending as a percentage of health spending is inclusive of all products and locations where they can be delivered (retail, hospitals) and are reported after discounts and rebates received by payers.
- Drug spending ranged from 9% in the UK to 20% in South Korea.
- Most of the major developed countries were between 14–18%, excluding the UK and Canada.
Drug spending has been growing more slowly than health spending in recent periods in most countries
- When comparing historic growth for drug and healthcare spending, drug spending has been growing more slowly than health spending in most countries, particularly in the last 13 years.
- Countries where drug spending has been growing faster than healthcare spending consistently include Brazil, Canada, and the UK, which in 2018 still have the three lowest drug spending share of healthcare of the countries studied.
- Countries with an upward inflection in the most recent period include Spain, the UK, and Germany; however, drug and healthcare spending are still within 1% of each other.
Drug spending share of healthcare has been converging around 15%, where greater variations existed previously
- Countries’ drug spending share of healthcare has been converging, with countries ranging from 4–28% in 2008 and 9–20% in 2018.
- Those countries with the highest drug share of healthcare uniformly have lower overall health expenditure, such as Italy, Spain and South Korea, which all spend less than $3,000 per capita on healthcare.
- Across the 11 countries, average drug spending percentage of healthcare rose somewhat steadily in the late 1990s and then stabilized for most of the last 20 years, averaging 15% of healthcare across these countries.
The top 5 therapy areas in 1995 and the top 5 in 2020 changed dramatically over the period
- Protected brands represent brands that have been in the market for more than 24 months and still hold market exclusivity.
- While examining only protected and new brands, the top five therapy classes in 2020 (oncology, immunology, anti-diabetics, anti-coagulants, and HIV anti-virals) have grown from 11% of spending in 1995 to 62% in 2020.
- The top five therapy classes in 1995 (cardiovascular, anti-bacterial, anti-ulcerants, mental health, and cholesterol) represented 53% of spending in 1995, and have collectively dropped to 6% in recent years, due to generalization and limited innovation.
Spending for protected brands has declined as patent expires and shifts to generics have not been offset by innovation
- Drug classes such as cardiovascular, anti-bacterials and anti-ulcerants have seen limited new medicines introduced and therefore have had a declining share of spending.
- In cholesterol-reducing drugs, most treatments were introduced in late 1990s and mid-2000s, and have already lost exclusivity, first with simvastatin in 2006 and then atorvastatin in 2011.
- In the last five years the new brands contribute to a small share of drug expenditure due to the limited uptake of PCSK9 drugs.