Predictions for the future of high-cost specialty drugs

Generics’ share of sales growth is slowing, dropping from 42% in 2011 to 8% in 2015; however, the number of total prescriptions for generics far outweighs those for brands, 83.4% and 16.6% respectively.

The U.S. healthcare system has saved $1.7 trillion in the last 10 years because of low-cost generics, $222 billion from antidepressants alone.

The end of patent exclusivity for Abilify and Nexium, helping to save $5 billion a week, along with a generic equivalent of Copaxone (Glatopa), played out in the market last year. During that time, generic price inflation ebbed, and Teva bought Actavis to take control of 20% of the generics market.

This year thus far has seen the final rule for average manufacturer prices under the Affordable Care Act and approval of the launch of generic Gleevec, and awaits patent expirations for Crestor, Benicar and Zytiga; final guidance for approval standards for generic versions of tamper-resistant opioids and for biosimilar interchangeability; and negotiations completed for reauthorization of the generic drug user fee amendments of 2012 and the biosimilar user fee program. 2016 also has set its sights on approval of additional biosimilars.

Although Long expresses optimism for the arrival of more biosimilars, he outlines the challenges: Development costs on average of $200 million compared to regular generics topping out at $4 million. In addition, he points out that not only is there an uncertain regulatory framework, but manufacturers are hard pressed to justify the costs for a limited user population.

Moving ahead

Long jumped ahead to 2020, when according to IMS Health, U.S. spending on medicines will reach $610 to $640 billion on an invoice price basis, with steady mid-single digit growth. In addition, Long expects innovation to drive a transformation of disease treatments, including more than 470 drugs to treat orphan diseases; breakthrough therapies for hepatitis C and autoimmune, heart and orphan diseases; and cancer drugs as market leaders; the latter comprised one-third of all launches last year.  

He anticipates that specialty spending will eat up 35% of dollars for 1% to 2% of prescriptions; innovation around the diseases recounted above; near-term focus on hepatitis C, PCSK9s, PD1s and orphan drugs; tools for managing generics, biosimilars and the appropriate use of medications; targeting of appropriate patient populations; exclusive contracts; and more price negotiations.

Despite the high cost of new specialty drugs, there are opportunities to curb rising healthcare and drug costs, Long says, by reducing readmissions, proving timely treatment, optimizing the use of drugs and improving adherence. Failure to take medications as directed drives $260 billion in additional care costs.

“Tomorrow’s models will be built on alignment and cooperation,” Long concluded, “having moved from a fee-for-service model to managed care and integrated delivery systems and finally to population management.”

Mari Edlin is a frequent contributor to Managed Healthcare Executive. She is based in Sonoma, California.