What the Data Are Saying on Drug Pricing and Utilization

By John M. O’Brien, NPC President and CEO

At the National Pharmaceutical Council, we believe it is important that we follow evidence-based research and the data when discussing policy solutions. That’s why last week I was pleased to join a virtual panel with academics and policy experts to discuss the IQVIA Institute’s report, The Use of Medicines in the U.S.: Spending and Usage Trends and Outlook to 2025. The new report provides a deeper dive into the factors that are driving medication use and health care spending in the United States, helping to inform conversations about value, costs and the role of medicines over the next five years. 

This discussion and report highlighted several data-backed insights that are salient to the current debate. 

To start, drug prices are not the primary driver of health spending. Numerous news articles and policymakers have highlighted the fact that overall drug spending increased in 2020, but this statistic from the IQVIA report is rarely acknowledged: Only 17.5 percent of the increase in drug spending between 2015 and 2020 can be attributed to rising drug prices. IQVIA’s report shows that the primary source of additional revenue for drug makers is growing utilization and the entry of new brands, not increasing drug prices. 

Furthermore, for the last three years,  net price growth has been less than inflation, as measured by the Consumer Price Index, with net prices declining 2.9 percent in 2020. 

More broadly, NPC research has shown that medications account for less than one-fifth of what we spend on health care in the U.S. Yet drug prices account for the majority of policymakers’ focus. This narrow focus, often grounded in anecdotes instead of data, misses other factors hindering patient access to medications and high-value care. 

One of these factors that definitely deserves more attention is benefit design. IQVIA’s report showed that over 55 million prescriptions were abandoned in 2020, and that higher out-of-pocket costs correlated to higher rates of abandonment. This shows that health insurance benefit design, specifically high-deductible health insurance plans that lead to high out-of-pocket costs, hinders patient access to high-value care.

This is happening even as the gap between list price and the more relevant – at least to patients – net price continues to grow. IQVIA’s report shows that about one in three dollars spent on drugs in 2020 did not go to the biopharmaceutical company, but where this 33 percent goes is murky. In spite of this gap, attributed to the discounts middlemen negotiate with drug makers, the IQVIA report makes it clear that “[m]ost discounts are offered to wholesalers and pharmacies and do not necessarily result in lower out-of-pocket costs for patients.” We need more transparency on this issue, because crafting the right policy solutions requires understanding the facts, not following the rhetoric.  

Something else came across loud and clear in the panel discussion: Innovation matters. Research shows the outsized impact medications have had on increasing life expectancy and improving patient outcomes. Patients continue to benefit from innovative medicines long after patents expire, when generics and biosimilars enter the market. The report quantifies some of the savings as a result: Between 2015 and 2020, drugs going generic resulted in more than $78 billion in savings in the U.S., and biosimilar utilization continues to grow with the potential for significant savings going forward.

The data in IQVIA’s report and highlighted in our conversation can be important in helping to craft policy solutions that help, not hurt, patients. I was grateful I had the chance to join my fellow panelists for this important conversation, which you can watch here if you missed it live.