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Drug expenditures expected to increase in 2023

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Medication Cost

Olivia C. Welter, PharmD

Authors of a new report published in the American Journal of Health-System Pharmacy (AJHP) predict that over the next year, overall spending on prescription drugs will rise compared to 2022.

In the new report on national trends in prescription drug expenditures and projections for 2023, new drug approvals, public health issues, and policy and legislation were all explored as factors influencing total drug expenditure.

In addition to overall spending, the report examines what drug expenditures may look like at various levels, such as within clinics or nonfederal hospitals.

2023 predictions

The report indicates that drug expenditures will likely rise in the United States by 6% to 8% overall in 2023. Clinics can anticipate spending increases in the range of 8% to 10%, and hospitals may see increases between 1% to 3%.

New drug approvals may be a contributing factor to estimated higher expenditures. FDA data show that the agency only approved 37 new drugs in 2022, which was a 26% decrease from 2021. However, the report indicates that 74 novel drugs are expected to be approved in 2023, with 22 of those anticipated to significantly impact hospitals and clinics both clinically and financially.

One drug that entered the market in 2023 is adalimumab-atto, a biosimilar of adalimumab. Adalimumab has been the top-selling drug for several years, and in 2022 it accounted for nearly 10% of all specialty drug sales. Its share of sales may decrease in 2023 due to biosimilar drugs like adalimumab-atto becoming available. In fact, FDA has approved seven other adalimumab biosimilars, but these have yet to launch for sales.

According to the report, PBMs, formulary placement, and physician preference are all factors that may influence spending on adalimumab and its biosimilars in 2023.

2022 data reveal trends

In order to provide an educated estimate on what future drug expenditures may be, the report authors reviewed 2022 spending data from the IQVIA National Sales Perspectives (NSP) database.

Most areas of the health care sector experienced increased spending on prescription drugs compared to 2021, a change driven primarily by increased drug utilization. In 2022, the total prescription expenditures in the United States was $633.5 billion.

Community pharmacies had the most costs associated with drug purchasing, accounting for 42% of total expenditures. Mail order pharmacies (28.5%), clinics (18.5%), and nonfederal hospitals (5.9%) also contributed significantly to overall spending.

Nonfederal hospitals were the only sector that decreased their pharmaceutical spending in 2022. Costs went down by 5.9%, primarily due to a 7.7% decrease in utilization.

The authors noted that the 5.9% decrease is the largest decrease since these annual reviews began in 1992. Notably, remdesivir appears to be the primary cause of this lower expenditure.

Effects of COVID-19 pandemic response

The COVID-19 pandemic fostered innovation in creating new drug products specifically to treat and prevent the disease. COVID-19 vaccines and drugs like remdesivir were administered frequently over the last several years, but use of these products has fluctuated as the severity of the pandemic has diminished.

For example, remdesivir expenditures in 2021 totaled $3.1 billion, but waned to $1.3 billion in 2022, according to the NSP database. This decrease greatly influenced hospital spending and contributed significantly to the 5.9% expenditure decrease noted for 2022.

Authors of the report used influenza vaccines as one marker in their analysis. Since vaccination is the primary management tool for flu, researchers predict that COVID-19 vaccines will be used similarly. COVID-19 vaccines moving into the commercial sector could shift spending, given that the Kaiser Family Foundation anticipates one dose will cost between $29 to $130. The authors estimate that annual expenditure on COVID-19 vaccines could be between $12.3 billion and $19.8 billion.

Public policy influence

One of the most notable pieces of health care legislation passed in 2022 was the Inflation Reduction Act (IRA). President Biden signed the IRA in an effort to lower prescription drug costs for Medicare patients.

While patient cost-sharing will decrease overall, the IRA contained various provisions that would both decrease and increase various federal expenditures.

Capping out-of-pocket spending and insulin costs, eliminating copays on vaccines under Medicare Part D, and expanding certain benefits could cause elevated spending by the government after the IRA is implemented.

Conversely, the IRA allows the federal government to negotiate drug prices and receive rebates if a medication’s cost increases exceed the rate of inflation, both of which can contribute to lesser spending.

However, provisions such as price negotiation aren’t expected to impact expenditures until 2026 for Medicare Part D and 2028 for Medicare Part B. ■

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