Growth in U.S. spending on prescription medicines fell in 2016 as competition intensified among manufacturers, and payers ramped up efforts to limit price increases, according to research released today by the QuintilesIMS Institute.

New medicines introduced in the past two years continue to drive at least half of total spending growth as clusters of innovative treatments for cancer, autoimmune diseases, HIV, multiple sclerosis, and diabetes become accessible to patients. The prospects for innovative treatments over the next five years are bright fueled by a robust late-phase pipeline of more than 2,300 novel products that include more than 600 cancer treatments. U.S. net total spending is expected to increase 2-5 percent on average through 2021, reaching $375-405 billion.

Drug spending grew at a 4.8 percent pace in 2016 to $323 billion, less than half the rate of the previous two years, after adjusting for off-invoice discounts and rebates. The surge of medicine introductions paused in 2016, with fewer than half as many new drugs launched than in 2014 and 2015. While the total use of medicines continued to climb, with total prescriptions dispensed reaching 6.1 billion, up 3.3 percent over 2015 levels, the spike in new patients being treated for hepatitis C ebbed, which contributed to the decline in spend. Net price increases—reflecting rebates and other price breaks from manufacturers, averaged 3.5 percent last year, up from 2.5 percent in 2015.

"After a year of heated discussion about the cost and affordability of drugs, the reality is that after adjusting for population and economic growth, total spending on all medicines increased just 1.1 percent annually over the past decade," Murray Aitken, senior vice president and executive director of the QuintilesIMS Institute said. "Understanding how the dynamics of today’s healthcare landscape impact key stakeholders is more important than ever, as efforts to pass far-reaching healthcare legislative reforms remain on the political agenda."

Patients age 65 years and over have accounted for 41 percent of total prescription growth since 2011. While the population of seniors in the U.S. has increased 19 percent since 2011, their average per capita use of medicines declined slightly, from 50 prescriptions per person in 2011 to 49 prescriptions per person last year.

In the age 50-64 year population, total prescriptions filled increased 21 percent over the past five years, primarily due to higher per capita use, which reached 29 prescriptions per person. The largest drivers of prescription growth were in large chronic therapy areas including hypertension and mental health, while the largest decline was in pain management.

Average patient out-of-pocket costs continued to decline in 2016, reaching $8.47 compared to $9.66 in 2013. Nearly 30 percent of prescriptions filled in 2016 required no patient payment due in part to preventive treatment provisions under the Affordable Care Act, up from 24 percent in 2013. The use of co-pay assistance coupons by patients covered by commercial plans also contributed to the decline in average out-of-pocket costs, and were used to fill 19 percent of all brand prescriptions last year, compared with 13 percent in 2013. Those patients filling brand prescriptions while in the deductible phase of their commercial health plan accounted for 14 percent of prescriptions and 39 percent of total out-of-pocket costs. Patients in the deductible phases of their health plan abandoned about one in four of their brand prescriptions.

The late-phase R&D pipeline remains robust and will yield an average of 40-45 new brand launches per year through 2021. At the end of 2016, the late-phase pipeline included 2,346 novel products, a level similar to the prior year, with specialty medicines making up 37 percent of the total. More than 630 distinct research programs are underway in oncology, which account for one-quarter of the pipeline and where one in four molecules are focused on blood cancers. While the number of new drug approvals and launches fell by more than half in 2016, the size and quality of the late-phase pipeline is expected to drive historically high numbers of new medicines.

Moderating price increases for branded products, and the larger impact of patent expiries, will drive net growth in total U.S. spending of 2-5 percent through 2021, reaching $375-405 billion. Net price increases for protected brands are forecast to average 2-5 percent over the next five years, even as invoice price growth is expected to moderate to the 7-10 percent range. This reflects additional pressure and influence by payers on the pricing and prescribing of medicines, as well as changes in the mix of branded products on the market. Lower spending on brands following the loss of patent protection is forecast to total $140 billion, including the impact of biosimilar competition, through 2021.

The full version of the report, including a detailed description of the methodology, is available online. The study was produced independently as a public service, without industry or government funding.