World projected to spend $1T on drugs in 2018

IMS projects US spending on medications will grow between 5% and 8% through 2018
IMS projects US spending on medications will grow between 5% and 8% through 2018

The top-line news from the IMS Institute for Healthcare Informatics is that the world is on track to spend $1.3 trillion on medications by 2018, or 30% more than it did in 2013.

The forces behind these numbers, however, highlight some upcoming tensions that have a lot to do with just who will be purchasing these drugs.

Among the data: IMS notes that the US continues to be the largest consumer, accounting for one-third of the global whole. The growth rate seems robust — IMS projects US spending will grow between 5% and 8% through 2018 — but the firm also notes that US growth is “disproportionate to its population growth.”

Price increases and a greater patient population (due to healthcare reform) have helped drive US performance, but IMS notes that the senior demographic is a critical one domestically and worldwide: The research firm writes that the 65+ age group “will grow faster than any other segment, and will account for almost 30% of overall population growth in the next five years.”

The rising number of conditions associated with old age would make this appear to be an easy group to sell to, but this is where financial tensions begin to surface. A Health Affairs study published this week notes that just 14% of the Medicare population accounts for 50% of the government program's expenses. The reason: this group is juggling at least six chronic conditions. It is not only medication-heavy seniors who have to think about prices. The study's authors note that the overall US population is also watching — 85% have a chronic condition, and that, US patients, more than any of the other 10 countries surveyed in the study, were likely to “report cost posed a barrier to their care.”

IMS adds another angle to the financial component, which is that higher prices and increased demand from both the 65+ and healthcare reform's deeper patient pool “will increase budgetary pressures on payers, with drug spending being a popular target for cost containment.” Developed ex-US markets will buoy drug sales, but IMS says the markets to watch include China, where it expects per-capita spending to grow 70% between now and 2018. This jump will make China the second-largest market, but will be the equivalent of 9% of the per-capita spend in the US. Southeast and East Asia are also expected to have increased drug demand due to a combination of factors including population growth, rising income, and increased access to healthcare.

In terms of where the money will be going, the industry's decision to focus on cancer will pay off in the form of $100 billion in global sales by 2018. The key will be in what IMS calls “stacked” treatments that improve overall survival, but again, this growth will be in developed markets.

Hepatitis C treatments will provide a steady amount of financial power, but IMS SVP and Executive Director Murray Aitken said in a Wednesday conference call that 2014 approvals created a category spike that will not be replicated in the near future. Instead, IMS expects sales will hit the $100-billion mark, but at a measured pace. The research team also expects that AbbVie's multi-pill oral, which is expected to be cheaper than Gilead's Harvoni (ledipasvir and sofosbuvir) and Sovaldi (sofosbuvir), will spur other drugmakers to “innovate around affordability and cost control.”

Although Aitken said the upcoming global trend “it is a story of continued growth,” he also noted that it is one that is linked to “a willingness to pay for that innovation, that access.”