In 2015, prescription drug spending in the United States was reported at $337 billion. It is projected that spending will reach $560 billion in 2020, a 66% increase over 5 years. Optum, the pharmacy benefit manager (PBM) subsidiary of UnitedHealthcare recently reported that there are over 150 drugs in the pipeline currently being evaluated by the FDA with 64 approvals expected in 2020.
Eleven of these are “blockbuster” drugs with sales anticipated to be more than $1 billion. 70% of the new drug approvals will target specific genetic cancer mutations. The second leading area of drug development targets neurologic disorders, including migraine headaches, Parkinson’s disease, and epilepsy – and also orphan drugs that treat rare conditions such as spinal muscular atrophy and neuromyelitis optica.
Orphan drugs, which cost on average $147,000 or more per year of therapy, will represent almost 40% of new drugs. With favorable fast-tracking of approval, exorbitant prices, insulation from patent exposure and limited populations from which to draw a future class action, it’s not surprising that pharmaceutical research continues to focus on this area of drug development.
Viewpoints from Craig Hasday
Although these drugs have a high price tag, it’s clear they represent an opportunity for cost containment and avoidance of potential high-cost claimants.
A few of the more significant pipeline drugs include:
- A new lipid-lowering pill which is believed to be more desirable than the injectable PCSK9 inhibitors, with a much lower price point
- A new drug targeting peanut allergies that is certain to allow parents to sleep easier
- And my favorite, a new drug to treat fatty liver disease, a condition that can lead to cancer and liver failure
With current and looming costs, however, it is no longer possible to passively manage pharmacy. These costs must be put under the microscope.
President, National Employee Benefits Practice