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Post-market price changes alone account for most recent spending growth for biologics

Annual spending by U.S. public programs and beneficiaries nearly doubled from $5.3 billion to $10.3 billion from 2012 to 2016.

Jeff Lagasse, Associate Editor

Annual spending on biologic drugs by U.S. public programs and beneficiaries nearly doubled from 2012 to 2016, with post-market drug price changes alone accounting for the majority of recent spending growth, while manufacturers' rebates have had little impact on rising costs. These findings were recently presented at the 2019 ACR/ARP Annual Meeting.

Biologics are genetically engineered proteins made from human genes that are designed to reduce inflammation and stop disease progression by targeting inflammation-causing agents in the body. While effective, biologics can be costly.

The American public spends billions of dollars each year on biologics, but it is still unclear what factors are driving recent increases in spending and per-patient costs for these drugs. This statistical cost analysis characterized changes in total spending and unit prices for biologics in Medicare and Medicaid and quantified the major sources of spending increases on biologics for public programs and their beneficiaries. Rising drug costs were the main reason for the new study.

WHAT'S THE IMPACT

Based on Medicare Parts B and D and Medicaid drug spending data from 2012 to 2016, the results showed that during that time, annual spending by U.S. public programs and beneficiaries nearly doubled from $5.3 billion to $10.3 billion for the 11 biologics included in the study. Drug prices increased by a mean of 52% in Medicare Part D and 20 percent in Part B.

Controlling for general inflation, unit price increases alone accounted for 56%, or $1.7 billion, of the five-year, $3.0 billion spending increase within Part D. Increased uptake accounted for 37%, or $1.1 billion. After accounting for time-varying rebates, price hikes for these drugs were still responsible for 53%, or $1.4 billion, of the Part D spending increase.

Adalimumab and etanercept, two of the oldest biologics, were prescribed to the largest numbers of Part D beneficiaries and also had the biggest unit price increases. Medicaid spending and price trends were similar to Part D.

The majority of spending growth for the oldest Part B drugs -- rituximab, abatacept and infliximab -- was due to price increases, while increases in the number of recipients was the main driver of spending growth for the five newer drugs -- golimumab, ustekinumab, tocilizumab, certolizumab and belimumab.

THE LARGER TREND

A Pacific Research Institute analysis published in October found biosimilars have the opportunity to bring significant savings to state Medicaid programs and consumers with commercial insurance, giving them a leg up over their chemical-based counterparts.

Biosimilars -- a biologic product highly similar to another, already-approved biological medicine -- have no meaningful difference in terms of safety or effectiveness compared to its originator biologic medication. This differentiates them from generic medications, which are chemically identical versions of a branded medication.

Biosimilars currently save the healthcare system more than $240.4 million, according to Wayne Winegarden, director of PRI's Center for Medical Economics and Innovation. Of these savings, 19.8% -- or $47.5 million -- is being realized by state Medicaid programs and 56.9% ($136.8 million) is being realized by the commercial market.

But greater use of biosimilars could create significantly more savings. If biosimilars obtained a 75% market share, less than the share of these medicines in many European Union nations, the resulting annual savings for the U.S. healthcare system could be nearly $7 billion, based on Winegarden's analysis.

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com