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Specialty drugs will continue to hike up spending. Photograph by Simon Dawson — Bloomberg via Getty Images

Global Drug Spending Could Hit a Record $1.5 Trillion By 2021— And That’s a Good Thing

Dec 06, 2016

Worldwide spending on medicines is projected to reach a record $1.5 trillion over the next five years. And that might actually be an encouraging result, according to a new QuintilesIMS report.

The $1.5 trillion figure, which considers topline invoices before discounts and rebates, would represent a significant $370 billion rise compared to estimated 2016 spending. But it's actually a dip in inflation compared to recent years.

"Importantly for the outlook is that spending growth is slowing in 2016, declining from nearly 9% growth in 2014 and 2015 to just 4–7% [compound annual growth rate] over the next five years," wrote the study authors. "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."

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Quintiles also noted that it "expect that issues of pricing, access and priorities will come to the forefront like never before," helping drive down costs in expensive markets like the United States and bringing post-discount global drug spending down to about $1 trillion in 2021. Expensive new therapies like Gilead's novel hepatitis C cures Sovaldi and Harvoni are already starting to cost less money in the face of concerted pushback from drug benefits managers and insurers.

Still, certain specialty drugs will continue to fuel a spike in spending, especially in more developed markets. For instance, a new generation of pricey cancer, autoimmune, and diabetes treatments will have an outsize effect in the U.S. and Europe, eventually accounting for half of all drug spending in those markets.

drug-spending-growth-jpg QuintilesIMS 

Another factor that could contribute to declining drug spending compared to the last several years, especially in the U.S., is patent expiration for key branded products in the autoimmune space and the rise of generic alternatives to expensive biologic drugs. For instance, a number of companies are jockeying to develop "biosimilar" versions of biologics like AbbVie's (abbv) Humira, the best-selling medicine in the world, and other medicines to treat common conditions like rheumatoid arthritis.

It's unclear exactly how much money these new generic copycats might save insurers over the long run since they have just begun to prop up in the U.S. market. But it seems that drug price growth may be hitting an inflection point after several years of massive increases.

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