Report estimates that global drug spending will reach $1.4 trillion by 2020

According to a report published Wednesday by the IMS Institute for Healthcare Informatics, total spending on prescription drugs will reach $1.4 trillion by 2020, compared with $1.07 trillion this year, as a result of increased patient access to chronic disease treatments and breakthrough innovations. The report estimates that this represents global spending growth at a compound annual rate of between 4 percent and 7 percent over the next five years.

Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, said "during the next five 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." Aitken added that "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 projected that more than 225 new drugs will reach the market over the next five years, including 75 new treatments for orphan or rare diseases. Additionally, about one-third of the new treatments will target cancer. IMS also predicted that "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 behaviour changes that will improve patient adherence to treatments."

IMS said the increased spending on new drugs will be partially offset by patent expiries, which are anticipated to lower spending on branded therapies by $178 billion, including $41 billion in savings on biologic drugs "as biosimilars become more widely adopted." Michael Kleinrock, research director at the IMS Institute, explained that "we are now getting much more value for every dollar or whatever currency we spend...because we can get decades' worth of innovation, most of it incredibly cheaply because generics are widely available."

The report indicated that US drug spending will range from $560 billion to $590 billion by 2020, up 34 percent versus 2015 on an invoice price basis, with generic drug usage in the country expected to climb from 88 percent of all prescriptions currently to between 91 percent and 92 percent by 2020. The group added that although invoice prices are expected to continue to rise at "historic levels" in the next five years, constraints from payers and competition will limit annual price increases for protected brands to between 5 percent and 7 percent.

IMS also noted that most of the global increase in use of prescription drugs over the next five years will occur in emerging markets, with India, China, Brazil and Indonesia accounting for nearly half of that growth. Meanwhile, the group said volumes in developed markets will stay "relatively stable and trend toward original branded products as use of specialty medicines becomes more widespread."

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