A pharmacist collects medications for prescriptions at a pharmacy in London, U.K., on Monday, Dec. 14, 2015. European pharmaceuticals stocks in 2015 have outperformed the Stoxx 600 Index by 1.2 percentage points in U.S. dollar terms. Photographer: Simon Dawson/Bloomberg
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US spending on prescription drugs rose to $453bn last year although the pace of growth slowed considerably, according to a report released on Thursday that will be used by the industry to bolster its campaign against new pricing regulations.

Gross spending on drugs increased 1.4 per cent in 2017, compared with a 4.8 per cent rise the previous year, while net spending — which accounts for manufacturer discounts and rebates — rose 0.6 per cent.

Both figures were lower than the Federal Reserve’s favoured measure of inflation, the personal consumption expenditures price index excluding food and energy, which rose by 1.6 per cent in February against the year before.

The report from The Iqvia Institute for Human Data Science also reported a $130bn difference between invoice spending on medicines and the amount in net revenues recouped by drugmakers, which it attributed to higher discounts and rebates.

Michael Kleinrock, research director at the Iqvia Institute, said the $130bn had gone to companies pejoratively known as “ middlemen” — for example pharmacy benefits managers, wholesalers and pharmacies — as well as health insurers and hospitals.

“All of them got some of it — but it is very difficult to tell exactly who got what,” he said.

Different parts of the private US healthcare system are likely to seize on the findings amid an acrimonious debate over who is to blame for soaring costs.

The amount of money handed back to insurance companies and PBMs via discounts and rebates has climbed significantly in recent years, the report found. The gap between invoice and net spending stood at $74bn in 2013.

Insurers and PBMs insist these savings are passed through to consumers in the form of lower premiums and out-of-pocket costs but they have been accused of operating opaque business models that mask how much is kept to boost profits.

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Drugmakers in particular have argued that the middlemen are not doing enough to ensure the discounts are enjoyed by patients. Industry lobby group Phrma recently launched an advertising campaign with the slogan “share the savings”.

The pharmaceuticals industry has highlighted evidence of slowing price inflation to support its campaign to stop federal and state controls on drug pricing, after Donald Trump repeatedly accused the sector of “getting away with murder” and promised to take action.

Iqvia also reported a large decline in the amount spent on generic medicines, which fell by $5.5bn. The report attributed the vast majority of that — roughly $5bn — to a collapse in the price of copycat drugs, which is being felt across the industry.

The report predicted that spending on medicines would pick up in future years and that overall expenditure on drugs will hit $550bn-$600bn by 2022.


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