Outlook for Global Medicines through 2021

Balancing Cost and Value

Medicines are advancing at an astonishing rate, as are the challenges in funding access to them for countries around the world faced with slowing economic growth and limited resources. This report provides an outlook on the use of medicines and spending levels through 2021.  It also discusses new medicines in late stage research and development, and issues of pricing, access and national priorities sure to be a focus over the next five years.

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Summary

Global medicine spending will reach nearly $1.5 trillion by 2021 on an invoice price basis, up nearly $370 billion from the 2016 estimated spending level.  Growth will be driven primarily by newer medicines in developed markets and increased volume in pharmerging markets. The number of new medicines reaching patients will be historically large, addressing significant unmet needs in cancer, autoimmune diseases, diseases of the metabolism, nervous system disorders and others. These areas of significant innovation are expected to drive most global spending growth, particularly in developed markets, but will be a key focus of payers and constrained by cost and access controls as well as a greater focus on assessments of value.

The outlook for medicine spending through 2021 is for growth coming off record rates in 2014 and 2015 to a more steady level of 4–7% CAGR over the next five years.  Off-invoice discounts and rebates, particularly in the U.S. market, will reduce this invoice-price growth by about 1%. European payers are expected to maintain tight constraints on drug spending to bring predictability to their healthcare budgeting processes. In the pharmerging markets, broad economic challenges have led to a range of derailed healthcare commitments, including delayed, revamped or cancelled expansion programs—initiatives that may be hard to restart even if economic conditions recover.

Key Findings

Global Medicine Spending Will Reach Nearly $1.5 Trillion by 2021 on an Invoice Price Basis, Up Nearly $370 Billion from the 2016 Estimated Spending Level

  • Spending growth is slowing in 2016, declining from nearly 9% growth in 2014 and 2015 to just 4–7% CAGR over the next five years.
  • The short-term rise in growth in 2014 and 2015 was driven by new medicines in hepatitis and cancer that contributed strongly to growth but will have a reduced impact through 2021.
  • Off-invoice discounts and rebates will reduce invoice-price growth by about 1%, resulting in a total global market of $1 trillion in 2021.

New Medicines Increasingly are Specialty in Nature, and Their Share of Global Spending Will Continue to Rise Through 2021

  • Specialty medicines will continue to rise from less than 20% of global spending ten years ago to 30% in 2016 and to 35% by 2021, approaching half of total spending in U.S. and European markets.
  • This rise primarily will be driven by the adoption of new breakthrough medicines, but also will be a key focus of payers and constrained by cost and access controls as well as a greater focus on assessments of value.

The Number of New Medicines Reaching Patients Will Be Historically Large

  • There are 2,240 drugs in the late-stage pipeline and 45 new active substances expected to be launched on average per year through 2021, addressing significant unmet needs in cancer, autoimmune diseases, diseases of the metabolism, nervous system and others.
  • Recent successes in cancer therapeutics, encouraged by opportunities for breakthrough therapy designations and shorter development cycles have led over a quarter of the entire late stage pipeline to be focused on the development of oncologics.
  • Therapies for central nervous system (CNS) disorders are the second largest area of R&D, making up almost an eighth of the total pipeline.

U.S. Protected Brand Prices Will Increase More Slowly Than the Past 3 Years

  • U.S. medicine costs will be driven by the use of transformative specialty brands and invoice price increases and offset by rebates and the use of lower-cost generics.
  • Brand prices will increase at 8–11%—more slowly than the 12–15% in the past 3 years and with fewer outlier major price increases as these have become unsustainable in light of high-profile media and political attention.
  • Net prices for protected brands are expected to increase, albeit at a slower 2–5% rate, and including some declines for products facing greater competition and price transparency.

The Introduction of Non-Original Biologic Medicines Will Contribute to Substantial Savings for the U.S. Healthcare System Through 2021

  • Despite uncertainty due to litigation with originators and regulatory, pricing and competitive dynamics, biosimilars are expected to affect spending over the next five years, with 25–35 products in development across biologic molecules with the highest sales levels.
  • The reduction in overall spending as branded medicines lose exclusivity is expected to total $143.5 billion in the next five years—more than 1.5 times the impact as in the past five years. This includes the estimated impact of biosimilars, which will contribute between $27–58 billion.

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