(Story updated at 1:05 p.m. ET.)
Spending in the U.S. on prescription drugs rose by 13% in 2014, driven largely by increased spending on new breakthrough medications, according to a report by the IMS Institute for Healthcare Informatics. And Medicaid patients' spending on drugs rose much faster in states that expanded Medicaid under the Affordable Care Act compared with those that did not, the report found.
The IMS' annual analysis on prescription drug use found medication spending reached its highest level since 2001, totaling more than $373 billion in 2014, with more than 4 billion prescriptions filled.
“In this report, we highlight a remarkable year in 2014,” Murray Aitken, executive director of the IMS Institute, said in a call with reporters about the study. “It's also a year that reflects the state of flux that the U.S. healthcare system is in.”
A large contributor to the rise in prescription drug spending was an increase in spending on specialty medications, which the study found rose by $54 billion over the past five years. Spending on so-called specialty drugs for treating serious chronic conditions accounted for one-third of medication spending in 2014, compared with 23% in 2009. Much of the increase came from drugs for hepatitis C, cancer, diabetes and multiple sclerosis.
The study found that new drugs accounted for more than $20 billion in drug spending growth in 2014, with more than half coming from four new therapies for hepatitis C. The number of patients treated for hepatitis C increased tenfold over 2013, to more than 161,000 in 2014. The new hepatitis C drugs, including Gilead Sciences' Sovaldi and Harvoni, accounted for more than $11 billion of the 2014 spending.
Medicaid was the largest driver of retail prescription spending growth in 2014, the study found. The number of prescriptions filled through the program rose by 17% in 2014, accounting for 70% of the overall growth in demand for medications.
The first full year of Affordable Care Act enrollment saw Medicaid beneficiaries in states that expanded the program for all adults with earning up to 138% of the federal poverty level fill 25% more prescriptions in 2014, compared with a 3% increase in non-expansion states.
But Americans with commercial insurance filled fewer prescriptions in 2014, compared with 2013.
The expiration of patents on certain drugs had a less significant impact on slowing spending growth in 2014 compared with previous years. In 2014, generics reduced medicine spending by $12 billion, compared with reductions totaling nearly $30 billion in 2012.
“Last year's $43 billion growth in spending on medicines was the highest ever, and 2014 also was a landmark year in the implementation of the Affordable Care Act,” Aitken said. “Yet the increase in the number of insured patients under the ACA directly accounted for only $1 billion of the spending growth as patients took some time to ramp up their medicine use—the vast majority of which was inexpensive generics.”
Prescription drugs accounted for 9% of total U.S. healthcare spending in 2013, according to CMS data.