Global Drug Spending to Reach $1 Trillion in 2014

This article published with permission from The Burrill Report.

Global spending on medicines is expected to hit the $1 trillion threshold in 2014 and reach $1.2 trillion by 2017, driven by greater access to medicines by the world’s rapidly expanding middle class, together with stronger economic prospects in developed nations.

After several years of spending growth below 3% per year, global drug expenditures are forecast to increase at a 3% to 6% compound annual rate over the next five years, according to new research released by the IMS Institute for Healthcare Informatics.

The report, The Global Use of Medicines: Outlook through 2017, found that growth in global spending on medicines increased 2.6% to $965 billion in 2012 and is forecast to gradually reach 5% to 7% in 2017, the highest pace of growth since 2009.

With the rising number of innovative new drugs expected to be approved over the next five years, particularly for the treatment of cancer, spending on specialty medicines is expected to reach $230 to $240 billion in 2017, up 38% from the $171 billion spent in 2012. Typically biologics that are used for conditions requiring complex treatment, specialty medicines will be the single largest contributor to branded drug spending growth through 2017.

At the same time payer concerns about rising costs for these drugs will intensify in both developed and emerging markets. As more countries move toward universal health coverage, there will be a divergence in growth rates between developed and emerging markets, says Murray Aitken, executive director of the IMS Institute.

“Austerity measures aimed at medicine budgets along with the growing availability of lower-cost generics will lead to annual spending growth of 1 to 4% among the markets of North America, Europe and Japan,” says Aitken. “In contrast, emerging nations will experience 10 to 13% spending growth overall — the result of economic expansion, changes in epidemiology and demographics, and greater government and private insurance funding for health care.”

Among emerging markets, China’s massive expansion of its health care system, will transform the medicines market with its goal of universal coverage by 2020. The country will represent 34 percent of total growth in global medicine spending over the next five years.

Generic alternatives to continuing patent expirations of blockbuster drugs are the single largest impact on growth levels, which will be balanced by a gradual return of global economic growth to 4% or more by 2017, according to the report.

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