Global Drug Spending Projected to Reach $1.4 Trillion by 2020


Specialty drugs for chronic, rare, and genetic diseases are forecast to drive a $298 billion increase in brand spending.

Specialty drugs for chronic, rare, and genetic diseases are forecast to drive a $298 billion increase in brand spending.

Global spending on medication is expected to reach new heights by the end of the decade as the gap between developed and emerging countries closes, according to a new report by the IMS Institute for Healthcare Informatics.

The IMS Institute report Global Medicines Use in 2020: Outlook and Implications forecasts total drug spending will jump 30% to $1.4 trillion by 2020, with global spending growth projected at a compound annual rate of 4 to 7% over the next 5 years.

This projected increase is attributed to greater patient access to chronic disease treatments and breakthrough innovations in medication development.

“During the next 5 years, we expect to see a surge of innovative medicines emerging from R&D pipelines, as well as technology-enabled advances that will deliver measurable improvements to health outcomes,” said Murray Aitken, executive director of the IMS Institute for Healthcare Informatics. “With unprecedented treatment options, greater availability of low-cost drugs and better use of evidence to inform decision making, stakeholders around the world can expect to get more ‘bang for their medicine buck’ in 2020 than ever before.”

The report predicts total global pharmaceutical spending will rise by $349 billion on a constant-dollar basis, compared with $182 billion over the previous 5 years.

However, when adjusting for rebates, discounts, taxes, and other factors that may influence manufacturer net sales, this spending growth decreases by $90 billion, which is approximately 25% of the 5-year growth forecast.

Among other insights in the report, IMS found global medication use will reach 4.5 trillion doses by 2020, an increase of 24% in 2015. Nearly half of this growth is expected to occur in India, China, Brazil, and Indonesia.

New specialty drugs comprise less than 1% of the volume in these markets as a result of low adoption rates in countries that lack the needed health care infrastructure.

New product launches and US price increases are expected to drive a $298 billion increase in brand spending, which IMS projects to be offset by off-invoice discounts and rebates. Specialty drugs for chronic, rare, and genetic diseases are forecast to account for 28% of this total.

In addition, patent expiries are predicted to further reduce spending on branded products by $178 billion. The impact of biosimilars should also be more fully realized, with IMS projecting $41 billion in savings on biologic drugs over the next 5 years.

US medication spending will jump 34% to between $560 and $590 billion over 2015 on an invoice price basis, according to IMS.

The report predicts more than 225 new drugs will be introduced by 2020, of which one-third will be focused on cancer treatment. Of cancer drugs in the pipeline, 90% are targeted therapies and one-third utilize biomarkers.

A growing number of superior quality new drugs are expected for conditions such as cancer, hepatitis C, autoimmune disorders, heart disease, and various rare diseases, the report predicts, with 75 new orphan drugs for dozens of conditions with limited or no treatment options currently available.

Technological advances are also predicted to help payers and providers control costs while improving medication adherence.

“By 2020, technology will be enabling more rapid changes to treatment protocols, increasing patient engagement and accountability, shifting patient-provider interaction, and accelerating the adoption of behavior changes that will improve patient adherence to treatments,” the report authors wrote. “Every patient with multiple chronic conditions will have the potential to use wearables, mobile apps and other technologies to manage their health, interact with providers, fellow patients and family members.”

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