AH110 - Inside the 2026 U.S. Medicine Use Trends Report with Michael Kleinrock
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What happens when two consecutive years of double-digit drug spending growth collide with a wave of pricing legislation, executive orders, and policy turbulence? On the latest episode of Astonishing Healthcare, host Justin Venneri welcomes Michael Kleinrock, Director of Research Development at the IQVIA Institute for Human Data Science, back to the show to find out and unpack the findings from IQVIA's 2026 Medicine Use Trends Report.
The headline number is hard to ignore: net drug spending in the U.S. reached $606 billion in 2025, a 10.6% increase year over year, following a 14.4% jump the year before. But the story behind that figure is far more interesting. Michael and Justin dig into what's driving growth (hint: it's not just GLP-1s), why the roughly $670 billion gross-to-net gap matters so much, and why list price still shapes what patients pay even though "nobody pays it." They also explore the uneven reality of the biosimilars market, the trade-offs created by the IRA's Medicare out-of-pocket cap, prescription abandonment, and where spending is headed through 2030.
- Spending growth is broad, not just a GLP-1 story. Excluding GLP-1s, spending was up 9.6% in 2025. Oncology, immunology, neurology, and other areas contributed to the uptick. Much of the growth came from mid-life protected brands. In fact, 28 drugs each contributed more than $500 million to growth in 2025, accounting for nearly $30 billion of the $58 billion total.
- List price spending hit $1.363 trillion in 2025, and while the list price may be "a fiction for most of us," patients in high-deductible plans or paying cash often have their costs pegged to it. The $670 billion “gap” flows through wholesaler discounts, hospital pricing, PBM rebates, Medicaid statutory rebates, and patient assistance programs.
- Prescription abandonment reveals a deeper access gap. When a prescription costs more than $125, more than half of patients walk away at the counter. Across all payers, 29% of new prescriptions go unfilled, pointing to challenges around health literacy, trust, and engagement that formulary design alone can’t fix.
- Biosimilar savings end up absorbed. Humira® and Stelara® faced biosimilar competition, yet uptake has lagged, partly because PBM contracting and formulary placement don't always favor biosimilars when originator rebates keep them preferred. Rather than pocketing the savings, the market moved on to newer therapies with higher net costs and no biosimilar competition.
- The IRA Medicare cap delivers real savings, but it comes with real trade-offs, too. The $2,000 annual out-of-pocket cap that took effect in 2025 produced genuine relief, cutting Medicare out-of-pocket spending by $638 million. But the benefit was uneven. Nearly a million beneficiaries still had costs above the cap, often paying out of pocket for drugs Medicare doesn't cover. And as rebates shrink under negotiated pricing, the cross-subsidization that kept premiums stable shrinks too.
- Lower list prices on insulins and inhalers raised net costs. While manufacturers voluntarily cut list prices, net revenue went up. The cause lies in Medicaid pricing mechanics: once the American Rescue Plan Act removed the 100% AMP Cap on January 1, 2024, dropping list prices below launch prices erased cumulative CPI penalty rebates, leaving only the 23.1% statutory rebate. The result? State Medicaid programs now absorb costs they previously didn't, a vivid example of policy producing the opposite of its intent.
How IQVIA Measures the U.S. Drug Market
So how did IQVIA arrive at these numbers? Historically, they have relied on audited sales data tracking wholesaler shipments. But, as Kleinrock explains, certain drugs, particularly cell and gene therapies – don't move through traditional wholesale channels at all. Others come from specialty manufacturers who deliberately avoid broad distribution to limit visibility into their commercial arrangements.
Those blind spots create measurement gaps. To address them, IQVIA built a novel approach, combining audited distribution data with SEC fdilings, company annual reports, and estimated gross-to-net patterns for the portions that can’t be directly observed.
The result: 84% of the $606 billion net revenue figure comes directly from public filings at the product level. The remaining 16% is estimated using observable patterns. It’s a more complete picture than any prior methodology, and it gives plan sponsors, payers, and policymakers a more honest baseline to work from.
Related Content
- IQVIA Institute will be hosting a webinar featuring a star panel, including past Astonishing Healthcare guest John O'Brien, CEO, National Pharmaceutical Council, Murray Aitken, Executive Director at The IQVIA Institute for Human Data Science, Stacie Dusetzina, Professor, Health Policy & Ingram Professor of Cancer Research, Vanderbilt University Medical Center, and others, to discuss this year's report findings on July 15th.
What's Actually Driving 10.6% Spending Growth?
It's Not Just GLP-1s
The most common assumption associated with drug spending growth is that GLP-1 therapies for obesity and diabetes are the primary drivers. Kleinrock directly pushed back on that framing.
“The number one question I’m asked is, is all the growth GLP-1s? In reality, it’s only 9.6% without that. So, it’s only a percentage point of current growth,” he explained.
The remaining 9.6% of growth is spread across oncology, immunology, neurology, and a wide range of other therapeutic areas, driven significantly by mid-life products that haven’t yet gone off patent and are still seeing strong uptake.
28 drugs each contributed more than $500 million in growth in 2025. Collectively, those 28 drugs account for $29.5 billion of the $58 billion in total spending growth, and that excludes GLP-1s entirely.
Why GLP-1 Growth Is More Nuanced Than the Headlines Suggest
GLP-1 patient volume essentially doubled during 2025. The cultural momentum, clinical data, and social media influence have pushed uptake far beyond what even Kleinrock anticipated. But the net revenue story is more complicated.
Many health plans still don’t cover GLP-1 therapies at the level they cover other newer medicines, so a significant portion of patients are paying out of pocket directly. That dynamic has pushed manufacturers to offer discounts, direct-to-consumer sales channels, and price reductions, compressing net revenue relative to gross sales.
Additionally, platforms like TrumpRx and manufacturer-operated direct shipment programs don’t fit neatly into the traditional pharmacy-PBM-insurer model. That represents a structural shift in how one of the fastest-growing drug categories reaches patients.
Key Factors Reshaping the Pharmacy Market Today
The pharmacy market doesn’t operate in isolation. Several converging forces are reshaping how drugs are priced, distributed, and accessed.
- Policy and legislative pressure: The Inflation Reduction Act (IRA), executive orders targeting drug pricing, and proposed Medicaid budget cuts are all altering the economics of drug manufacturing, distribution, and coverage decisions.
- Direct-to-consumer channels: As noted above, these platforms are bypassing traditional distribution infrastructure and challenging how plan sponsors think about formulary design and network adequacy.
- Biosimilar competition: Patent expirations on major biologics are creating real, if uneven, savings opportunities. How quickly biosimilars gain market share depends heavily on PBM contracting, formulary placement, and physician adoption.
- Patient behavior: Prescription abandonment, low persistence on chronic therapies, and declining provider visit rates signal that affordability and engagement challenges are shaping demand as much as clinical innovation is.
The Gross-to-Net Gap: Why $670 Billion in Spread Matters
Understanding the Spread Between List Price and Net Revenue
List price drug spending in the U.S. hit $1.363 trillion in 2025. Net revenue to industry was $606 billion. The spread between those two numbers is approximately $670 billion, and understanding where that spread goes matters enormously for how the healthcare system functions.
Kleinrock is careful to note that list price is “a fiction for most of us,” but that doesn’t mean it’s irrelevant. For patients in high-deductible plans, or those paying cash, out-of-pocket costs are frequently pegged to list price, or to an allowed amount that’s still linked to it structurally.
“If you’re in a deductible, depending on how your plan is designed, that prescription drug cost sometimes will be using list price as the allowed amount at the pharmacy. So, you’re in your deductible or coinsurance phase, that will be tagged to that price.”
The $670 billion in discounts flows through several channels: wholesaler discounts, hospital pricing, PBM rebates, Medicaid statutory rebates, and direct patient assistance programs. That last category, coupons and charitable assistance, is something many commercial plan sponsors don’t fully account for when evaluating their plan’s true net economics.
The Inflation Reduction Act: Real Savings, Real Trade-Offs
The IRA introduced several mechanisms designed to lower drug costs for patients. For Medicare beneficiaries, the law implemented a $2,000 annual out-of-pocket cap on prescription drugs starting in 2025, a significant change for people managing high-cost conditions on fixed incomes. It also gave CMS the authority to directly negotiate prices on a defined set of high-spend, single-source drugs, with the first negotiated prices taking effect in 2026.
The law also requires drug manufacturers to pay rebates to Medicare if they raise prices faster than inflation, a provision aimed at curbing the kind of price escalation that created CPI penalty dynamics in Medicaid. Executive orders in recent years have further targeted drug pricing, including proposals to tie U.S. prices to international reference benchmarks through “Most Favored Nation” pricing approaches.
But the savings story is more complicated than the legislation’s intent. As rebates shrink under negotiated pricing, the cross-subsidization that kept premiums stable in prior years shrinks with them. The actuarial math doesn’t simply net out in consumers’ favor. Plan sponsors and policymakers are navigating a system where individual policy levers affect multiple pricing layers simultaneously, and often not in the direction intended.
The Insulin and Inhaler Case Study: Lower List Prices Raised Net Costs
One of the more striking findings in the Report involves insulins and inhalers, two categories where manufacturers voluntarily cut list prices in recent years. The intuitive assumption was that lower list prices would mean savings across the board. What IQVIA observed was the opposite: net revenue received by manufacturers for those products actually went up.
The explanation lies in Medicaid pricing mechanics. Many insulins had experienced years of price increases above the rate of inflation, generating cumulative Consumer Price Index (CPI) penalty rebates that, under the old AMP Cap rules, would have effectively priced the product at a penny for Medicaid purposes. When the American Rescue Plan Act removed that 100% AMP Cap on January 1, 2024, the math changed entirely.
Dropping the list price below the original launch price removed those CPI penalties. The drug became subject only to the statutory Medicaid rebate of 23.1%, which on a $30 product is real money versus the near-zero pricing that existed before.
The result: state Medicaid programs now absorb costs for these medicines that they previously weren’t absorbing, creating new budget pressures in those programs.
Those pressures arrive at a particularly difficult moment. Federal proposals to cut Medicaid funding are already advancing through budget discussions, and the combination of new drug cost exposures and reduced federal support could force states to make difficult coverage decisions.
The likely outcome isn’t a simple reduction in spending. Patients who lose Medicaid coverage or face tighter formularies don’t stop needing medication. They defer care, rely on emergency services, or shift costs to other payers. The downstream healthcare cost effects of deep Medicaid cuts could easily exceed the short-term savings they’re designed to produce. That trade-off is already drawing political attention from governors, hospital systems, and patient advocacy groups who recognize that coverage restrictions tend to generate larger system-wide costs over time.
It’s a vivid example of how policy-driven price changes can produce outcomes that are nearly the opposite of what was intended, especially when the policy doesn’t account for how the existing system was already functioning.
Prescription Abandonment and the Access Gap
When Patients Don't Even Reach the Pharmacy
Prescription abandonment data reveals a pattern that’s more structural than most discussions acknowledge. Kleinrock identifies two distinct access barriers operating at different points in the care journey.
The first happens before anyone writes a prescription. Post-pandemic, patient volume trends remain below pre-pandemic levels across the market. Some of that reflects healthier behavior. But some of it reflects patients who never went to see a provider in the first place, either because of cost concerns, behavioral inertia, or general disconnection from the system.
“What we’re seeing, though, is the economic effects and behavioral effects of them not approaching the provider in the first place. And so there’s this sort of lower initial presentation which then has this downstream effect. If I didn’t go to the doctor two years ago, I wouldn’t have got through the various diagnostics and scans and blood tests and prior authorizations and step therapies to get to a drug therapy…”
That upstream gap has a downstream echo. A patient who skips a primary care visit two years ago doesn’t go through diagnostics, doesn’t get a prior authorization, or doesn’t step through therapy. The branded prescription that might have been written never gets counted in the data, because the patient was never there.
The $125 Threshold and What It Tells Us
One of the more immediately actionable data points in the conversation: when a prescription costs more than $125, more than half of patients walk away from it at the pharmacy counter.
That $125 has an interesting parallel. In a typical high-deductible health plan, a primary care visit costs roughly the same amount. The implication is that cost-aversion at that price point isn’t unique to pharmaceuticals. It reflects a broader threshold at which patients in high-deductible plans start making different decisions.
Even at the low end of the cost spectrum, abandonment rates don't disappear. IQVIA's data shows a 10% abandonment rate even for prescriptions costing less than $20. Patients are walking away from $20 prescriptions. That's not primarily a formulary or benefit design issue. It's something more complex, touching on health literacy, trust in the system, and general engagement with care.
GLP-1 Persistence and the Chronic Therapy Problem
The persistence data for GLP-1 therapies has attracted significant commentary: at the end of one year, roughly 30% of patients initiated on GLP-1 therapy are still taking it. That sounds alarming, until Kleinrock adds context.
That 30% one-year persistence rate is roughly consistent with four other major chronic therapy classes IQVIA analyzed. Hypertension medications, cholesterol-lowering drugs, and other maintenance therapies show similar patterns. This isn't a GLP-1-specific failure. It's a system-level challenge in sustaining patients on therapies that are clinically designed to be long-term.
The unanswered question isn't unique to GLP-1s: what happened to the other 70%? Did therapy stop working? Did patients face an affordability barrier? Did they think they were done? For a chronic maintenance condition, the clinical expectation is that discontinuing treatment means health outcomes worsen over time, and future costs increase.
29% of new prescriptions across all payers go unfilled. That's a significant number worth sitting with.
“There is a breadcrumb for all of us to be thinking about how to retain and have persistence on therapy. Because some might say that’s waste, right? Some might say that you started and you didn’t finish. We didn’t get anything for that. It’s not waste that should be avoided. It’s waste that we didn’t finish the job.”
Medicare's Out-of-Pocket Cap: Real Savings, Complex Trade-Offs
The implementation of the Medicare out-of-pocket cap produced measurable benefits for the patients it was designed to help. Medicare beneficiaries with annual drug costs above the cap saw their out-of-pocket spending decline, providing genuine relief for a population that's largely on fixed incomes. This cap, enacted under the IRA, represents one of the most direct prescription drug cost policies to reach patients in recent years.
But the policy also created some less-anticipated dynamics. Almost a million Medicare patients still had costs above the cap, and when IQVIA looked more closely, many of them were paying out of pocket for drugs not covered by Medicare, obesity medications being the most common example until recent policy changes, and products like erectile dysfunction treatments that remain excluded by statute.
That pattern isn't unique to Medicare. Commercial plan members navigate similar coverage gaps by going outside their insurance, sometimes because the drug they need isn't on formulary, and sometimes because a cash-pay option or coupon program offers a better deal than their plan's cost-sharing structure. Insurance being the only way patients pay for medicines is an assumption the data doesn't support.
The Biosimilars Market: Savings That Keep Getting Absorbed
Biosimilars represent one of the most closely watched cost-containment opportunities in the pharmaceutical market. When a major biologic loses patent exclusivity, biosimilar manufacturers can enter with competing versions at lower price points, creating the conditions for meaningful savings. In theory, this is the system working as intended.
In practice, the savings trajectory is uneven. Humira, the top-selling drug in the world for years, began facing biosimilar competition in 2023. Multiple manufacturers, including AbbVie's own biosimilar-adjacent pricing moves, entered the market.
Yet uptake has been slower than many anticipated, partly because PBM contracting arrangements and formulary placement decisions don't always favor biosimilars, particularly when the originator manufacturer offers rebates that effectively keep their product preferred. Stelara followed a similar path.
Together, those two drugs had accounted for nearly half of all immunology spending. As biosimilar competition arrived, the market didn't simply pocket the savings. It moved on to the next generation of therapies for psoriasis, Crohn's disease, ulcerative colitis, and severe asthma, therapies with higher net costs and no biosimilar competitors yet.
The structural question for the biosimilars market going forward isn't just whether biosimilars get approved. It's whether the contracting, formulary, and prescribing environment actually lets them compete. Policies that promote interchangeability, require biosimilar consideration in formulary reviews, or restructure rebate incentives could meaningfully accelerate savings.
Without that kind of structural support, biosimilar manufacturers will continue to face a market where clinical and economic logic doesn't automatically translate into uptake.
What the Spending Outlook Looks Like Through 2030
Double-digit growth won't continue indefinitely. Kleinrock projects U.S. drug spending growth to slow to a range of 4.5% to 7.5% annually through 2030, driven by several converging forces.
- Patent expiries will bring biosimilar competition to a number of high-spend categories
- IRA price negotiation will apply to a growing list of drugs each year
- GLP-1 competition from the nearly 200 obesity drugs currently in development could drive price reductions over time
But the broader pattern Kleinrock observes is that savings from patent expiries and biosimilars keep getting absorbed by the next generation of therapies. Immunology is a clear example. When Humira and Stelara faced biosimilar competition, those two drugs had collectively accounted for nearly half of all immunology spending. The savings materialized to some degree, but the market moved quickly toward newer therapies for psoriasis, Crohn's disease, ulcerative colitis, and severe asthma.
"The trade-off between capturing savings and having something better seems to be tilting towards innovation, tilting towards the something better across a whole range of therapies."
Oncology is following the same trajectory. Newer therapies extend survival and treatment duration, meaning patients stay on therapy longer. That's unambiguously good news for patients with those conditions. It also means the system keeps spending.
What This Means for Plan Sponsors and Healthcare Stakeholders
The 2026 IQVIA U.S. Medicine Use Trends Report isn't a comfortable read for anyone hoping that policy activity is already bending the cost curve.
The data suggests a system generating real clinical value, delivering measurable outcomes for patients in oncology, immunology, neurology, and migraine treatment, while simultaneously struggling to retain those patients on therapy, close the access gap at the pharmacy counter, and manage the actuarial complexity created by rebate structures and benefit design.
For plan sponsors, the specific dynamics worth watching closely include:
- Prescription abandonment rates, even at low cost thresholds, which signal engagement and access problems that formulary changes alone won't solve
- Gross-to-net dynamics for high-rebate drugs under IRA negotiation, particularly how premium stability is affected as rebates shift
- Biosimilar uptake patterns, including whether PBM contracting structures are channeling savings to plan sponsors or absorbing them through rebate-preferred originator products
- Medicare cap ripple effects on commercial plan design, as more patients navigate around their insurance for specific categories
- GLP-1 persistence patterns, which mirror chronic therapy broadly and raise questions about how plans design and communicate long-term maintenance benefits
- Medicaid budget cut exposure, particularly for plan sponsors with populations that include Medicaid beneficiaries or that could absorb cost-shifting if coverage tightens
For more information and reference materials:
The full 2026 U.S. Medicine Use Trends Reports is available on the IQVIA website.
Lightly edited for clarity.
[00:22] Justin Venneri: Hello, and thank you for joining us for another episode of the Astonishing Healthcare Podcast. Today, I'm excited to have Michael Kleinrock from IQVIA back in the studio with me almost exactly a year after episode 71, when we covered your 2025 Use of Medicines report.
So here we are, Michael, talking about your latest US Medicine Use Trends Report for 2026. We'll be talking about the forces shaping drug spending and patient access, forces changing how people access the report, as the case may be, because that's even a little different: GLP-1 growth, the widening gap between list and net prices, and policy-driven distortions. There's a ton packed into this one, I think, if it goes the way we expect it to. But you know, with scripted, unscripted stuff, you never know which twists and turns these conversations will take.
Michael, thanks for joining the studio.
[01:04] Michael Kleinrock: Yeah, thanks for having me. And yeah, this should be fun. It was fun last year, and a lot that we had uncertainties about then, we're clearer on, and there's new ones this year. So let's get to it.
[01:14] Justin Venneri: Before we get into it, a little bit of background in case anybody hasn't heard you before, doesn't know about you, your team at IQVIA, what you do there. Give us a little quick. Sure.
[01:21] Michael Kleinrock: So the IQVIA Institute is a research-based part of IQVIA. IQVIA is a very large company that serves the life sciences sector globally. We operate in over 100 countries and have 90,000 employees. We have thousands of colleagues running clinical trials as an outsourced resource for sponsors. We have colleagues who are essentially outsourced sales reps for drug companies. And we have thousands of my colleagues.
I've worked here 27 years now. So thousands of them who do data and analytics and services for governments, payers, providers, and pharmaceutical companies to better understand the use and spending on medicines in all of its attributes. And so whether that is the volume of medicine shifts, how it's being dispensed, whether prescriptions are being used or abandoned, what the list prices of them are, how those are translating into out-of-pocket costs, again, in over a hundred countries with varying pieces of data available. And my team's work focuses on all of that. It's hard to focus on everything.
But we, we have a number of reports, particularly our global Use of Medicines and our US Use of Medicines, that really profile the US in detail, with a little bit less detail in the global. But the US report is something we've been doing every year since we founded the Institute in 2011. We've made that without external funding and as a public service. And as you said, more recently this year, we have changed the way you access those reports.
Previously, they were available free to download. In the new model, there is a charge for that material. There has been an evolving dynamic. We can always talk about it in terms of how AI is changing the way creators and content owners disseminate information, and the charge is in some way a way to protect that information from use by unintended audiences.
[03:02] Justin Venneri: It's incredible, the unintended consequences of AI's rapid expansion.
[03:07] Michael Kleinrock: And immeasurable use cases certainly is an interesting part of it, but it doesn't help us yet solve the problem of a patient figuring out how to use their medicine or how to afford it. Those are still human interactions sometimes.
[03:19] Justin Venneri: So to get right into it now, a little bit, you and the team at IQVIA have really been able to refine your measurement approach, and you're comparing national drug distribution data with rejected sales data and adjusting for gaps. Tell us a little bit about the exercise and how your approach has evolved.
[03:35] Michael Kleinrock: Historically, we've been leveraging IQVIA's audited sales data, drug distribution data, to understand the spending on medicine in the market. What we've been realizing and adjusting for is that there are increasingly specific types of medicines and specific destinations of those medicines, which are not always well tracked in an audit. So if an audit is tracking wholesaler shipments and a drug like a cell or a gene therapy is not shipped through a wholesaler, that creates a gap, as you described it.
Similarly, there are a number of specialty companies who find distribution of their medicines is more advantageous commercially to them if no one knows the exact nature of their business, other than perhaps a publicly traded company filing once a quarter. So those blind spots or gaps are a challenge for most of my peers in this space. And what we did in this latest report is that we've put together our available resources in a novel way to essentially better estimate those gaps.
And so we have a new and improved view of the market in its scale as a guide. We are measuring the overall US market at $606 billion in net revenue for industry. 84% of that is directly coming from SEC filings from those companies, either public companies or private companies, who make an annual report that we can get to their product-level sales. The remaining portion of that is estimated based on the patterns we see in gross to net for those that we can observe, and parts of the gross analysis before the discounts and rebates are estimated in a similar, suitably complex way.
Now, the key element is that 606 is the net revenue the industry is receiving after all of the discounts and rebates and coupons and other things that they are conceding to every stakeholder, either from a regulatory mandated basis, such as a Medicaid rebate or 340B, or through commercially negotiated discounts and rebates, or through coupons and patient assistance that they provide to patients. So that's the net afterward, which is a really useful measure of what's going on. We also, in the report, measured the payer responsibility in an aggregate sense so that we can understand how much payers are responsible for and how much patients are responsible for.
And then, for fun, we also used list prices, which are a fiction for most of us. No one pays that except if you have a high-deductible plan or you are paying cash. Sometimes your co-pay or your responsibility at the pharmacy is going to be linked to that. So we really wanted to put all of those options out that way. There's a way to understand and analyze different levels of the market, different negotiated positions between stakeholders.
[06:01] Justin Venneri: So talk to me a little bit about the numbers and what you saw year over year. Basically, you described the gross to net bubble where the list prices are, like, what was the delta in 2026? What are we looking at for year-over-year growth that people are saying, oh, spend on pharmaceuticals is up X percent year over year? Any detail around the number to provide some context to it would be great to hear.
[06:19] Michael Kleinrock: Sure. So $606 billion is the spend in 2025. That's up 10.6% over the prior year. By the way, 2024 was up 14.4% over the prior year. So we had two double-digit years, which is a really big contrast to what I think the expectation is. With all of the discussions of drug pricing and policy and the Inflation Reduction Act and tariffs and executive orders, this number is much lower. But in reality, this number is very high: 10.6% growth. And that is only 9.6 if we take out the GLP-1s and COVID, which are outliers over the last five years. COVID had a couple of years at high 20s or 30 billion a year for those vaccines and therapeutics; it's been down much, much more recently.
But the GLP-1s, so the obesity and diabetes GLP-1s, have had significant growth over the past few years. And generally, the number one question I'm asked by people as well is, isn't all the growth GLP-1s? And reality is it's only 9.6%. Without that, it's, it's only a percentage point of the current growth. It was a little bit in 2024, a little bit more than that. But what we're seeing is even though there's this sort of generational flood of patients into these therapies, and it is unusual, it is a very high uptake, despite the fact that many plans are not covering them with a typical level of coverage for newer medicines. So patients, a lot of them are paying direct.
And so what's been happening is that there have been price reductions, discounts; there's the direct sales from the manufacturers. And so overall GLP-1 growth on a net basis is obviously a little lower. The result is this really strong contribution for the couple of companies that are involved there. And that's a central story to every conversation we seem to have. But that's not all of it, because the vast majority of it, the other 9.6% of growth, is spread across a whole range of products, dozens of them that are in a number of therapeutic areas: oncology, immunology, and neurology. There are a whole range of areas where that growth is continuing. And they're midlife products. They're not launched in the last couple of years; they're a little bit older, they're not yet off patent, and they are significantly growing. There are 28 drugs with more than half a billion dollars of growth last year. 29 and a half billion dollars of the 58 billion we had in total growth was coming from those 28 drugs.
And that's excluding the GLP-1s. It's a significant, widespread group of medicines that are, I guess I think of it in the sense that, they're growing that much, they must be doing something right from a multiple-stakeholder perspective, because certainly not just the patients, but providers and payers have to be satisfied with those medicines, or they wouldn't be getting that kind of support.
[08:47] Justin Venneri: I mean, it's a combination of utilization and price. Right? Can you talk a little bit about the spread? I mean, there is a large spread between WAC-based wholesale acquisition cost. Right? Lots of acronyms in drug pricing and healthcare, and net revenue across the industry. And I think our more sophisticated listeners understand the details here a little bit better. But list price still matters.
I think when people say nobody really pays list price, what's missing from that argument? Why does list price still carry so much weight in a market that claims to operate on net economics?
[09:16] Michael Kleinrock: Yeah, so, I mean, what we're talking about is 1.363 trillion. You know, with a T, is the list price sales in the US market last year. So 606 to 1.36, 1.4 trillion. Right? It's a very large number. It's about $670 billion in the spread. It's important that when we say nobody pays it, it's because those numbers are a fiction in some sense. The list price sales don't ever happen. The list price may be a component of fee-based structures or percentage-based markup that different stakeholders take.
But, for example, from a list price, a wholesaler will probably take a significant discount from the list price. So the wholesaler discounts are a significant chunk. Historically, IQVIA has measured things at wholesaler prices. It's not a number that I put in the report this year, but it is a big chunk of that. And then what happens in terms of why we care about list price is that if you're in a deductible, depending on how your plan is designed, that prescription drug cost, sometimes they'll be using list price as the allowed amount at the pharmacy. And so if you're in your deductible or your coinsurance phase, that will also be tagged to that price. It's not always a list price.
Sometimes it's tagged to an allowed amount, which is a negotiated one, but it's generally pegged to that in some way. So the structure of these benefit designs means that you are thinking about these costs as a consumer in that way. The spread also just tells us how the system works. While I don't specifically break down the spread in terms of how much is discounts to the wholesalers, and how much is discounts to hospitals, and how much is rebates specifically to PBMs, recognize that those rebates that PBMs receive on some drugs are part of the plan design for all of the covered lives in that plan. And those rebates are what essentially keep the plan balanced. And so large rebates on some products help cross-subsidize other products and other spend and keep premiums from rising.
That's a really important marker for our conversation, because if we lower reimbursement prices the way IRA price negotiation does, it doesn't necessarily lower the net price; it lowers the reimbursement price and may remove some of the rebates from the conversation. If the rebates are missing, the insulation from premium rises is also missing.
So there's a number of conversations where this waterfall, this, this crosswalk between the gross and net, really starts to matter for different stakeholders. And it's frankly pretty arcane stuff. But it's central to how the system works, and it's not necessarily well reflected in the policy discussions that are revolving around it.
[11:36] Justin Venneri: One of the more striking examples, I think we talked about, you have in the report: insulin and inhalers, is that right? Expand upon that, and then are there any other call-outs from this year's report that you'd want to touch on for a minute? Yeah.
[11:48] Michael Kleinrock: So, I mean, I think one of the more interesting dynamics that's happened in the last couple of years, and it certainly happened to insulins and inhalers, is a situation where the list prices of those medicines were dropped. And one would think that immediately means people save money. But what's interestingly happened, we've observed in the analysis, is that the net revenue the companies received actually went up for those medicines. And there's reasons.
One of those is that in Medicaid, some of these medicines had had historic price increases above inflation so much that their Medicaid price was essentially a penny. They had reached what is called the AMP cap, or the average manufacturer price cap, which was capped at 100% until January 1, 2024. The American Rescue Plan Act, the ARPA Act, triggered the removal of the AMP Cap. With the AMP Cap removed, if something would have a CPI penalty-driven rebate that was greater than 100%, there would have been this figurative tying of a 20 bill or $100 bill around a vial of insulin. That would have been going on. It's descriptive. I'm not sure it's strictly accurate how that works, but that's the concept.
And so the list price cut has a significant impact, because it means that the price now dropping below the launch price means that it's now no longer subject to those CPI penalties, and now it's only subject to a best price and statutory reason rebate, which, again, this is arcane stuff, but it's 23%.
So for anyone at home doing the math in black and white, who wants to take what is the new price, for argument's sake, say $30, and take 23.1% off, you're going to find that that's more than a penny. The old AMP cap price exceeding 100% rebate would. It was always sort of penny pricing, they called it, it was one penny. So imagine there's a penny versus 23 bucks or something like that. That's resulted in state Medicaid budgets actually absorbing the cost for these medicines that they previously were not absorbing. And that creates an interesting challenge for them when you cross that with the funding changes that have happened in last summer's budget bill that have Medicaid cuts that extend for the next foreseeable period. So where we're looking at these dynamics, you can find some, some breadcrumbs for some odd outcomes.
And that's kind of what we're looking at with that insulin and inhaler example. And there's others where, say, for example, a company was subject to sort of an economic pattern where the patients who are typically getting a drug are unable to afford it. There's a lot of charitable care. But now we have the Medicare out-of-pocket cap, and so those patients can now afford that medicine, and it can go through traditional Medicare insurance again. There are some companies who benefited from their drugs no longer being charitably given, and instead being funded through the traditional plans.
Now the plan is responsible for more. That's a Medicare thing. It's not necessarily a commercial PBM decision. If there are negotiations, or there are price cuts, and there are rebates which are no longer in the mix, the flexibility and the latitude PBMs have in terms of the breadth of their portfolio, the generosity of the benefit design for the money, these are actuarial questions that don't resolve themselves very easily, that's for sure.
[14:34] Justin Venneri: Anytime the actuaries get involved, you know, it's, you know, it's serious. Big themes, you know, affordability and access. You mentioned out-of-pocket costs in the evolving world of direct-to-consumer, you know, TrumpRx expanding, partnering with Cuban now. Super interesting dynamics going on there. I'm actually curious, though, in your report you talked about this last year with us a little bit. Did you observe anything related to prescription abandonment or other related data that would suggest, you know, an impact from everything going on in the market on affordability and access at the counter for patients?
[15:03] Michael Kleinrock: It's funny, for abandonment, we've been seeing this trend for a long time. More than anything, what I'd say is that there's two things that I can see in the data. One is that the volume trends in the market are continuing below a pre-pandemic level.
So even though we're done with the pandemic and we're recovered, patient behavior has a number of milestones. You're sick, and you know it. You turn up to the doctor or provider in some fashion, they prescribe you something, and then you get to the pharmacy, decide if you can afford it.
What we're seeing, though, is the economic effects and behavioral effects of them not approaching the provider in the first place. And so there's this sort of lower initial presentation, which then has this downstream effect. If I didn't go to the doctor two years ago, I wouldn't have gotten through the various diagnostics and scans and blood tests and prior authorizations and step therapies to get to a drug therapy, to just get to a generic and then step through to a brand. There's a lag effect for branded prescriptions that drives higher costs. 93% of prescriptions cost less than 20 bucks. So the vast majority of people have an affordability situation, which is fine for the ones who fill those prescriptions, but for the ones who don't, they're missing.
To us, if they never made it to the doctor, we don't know they're there, other than some sort of general view of how many people should be sick. What if we're just healthier? That could be great. I mean, everybody had oat bran muffins in the 80s, and everybody's, everybody's doing great. We're all going to the gym. Or there's a number of people who are stuck behind the burdens of life and are generating worsening health outcomes, which are significantly concerning. It's hard to tell the difference between those sometimes.
And so what we're looking at is the tags or the breadcrumbs of those theories, and trying to figure out which is which. And so abandonment is always. It's like a straight social science maxim here, is that if you see a cost above $125, more than half of those people are going to walk away. And that to me is a really convenient number, by the way, because typically in, in a high-deductible health plan, a primary care visit is about 125 bucks, list price. Half the people are not going to go because they know how much it costs.
Obviously, an annual health check should be free, and preventive care should be free, but a lot of people don't really know how the system works, and so they avoid care because they just aren't thinking about it. Especially younger and healthier and working people, and people with kids, like, our kids go because they're jumping out of trees, but the rest of us tend not to go to the doctor as often. All of that translates into missing prescription volume, missing use of the system. And is that an affordability problem? Probably.
Secondly, there's then the issue of the people who do show up, who made it some of the way through and then still abandoned, or still are not persistent on therapy. We study that a lot in the report, and we find significant evidence that there are really access and affordability barriers for patients who have gotten far enough for their doctor to prescribe something, and then they still don't stick with it for a sustained period.
[17:53] Justin Venneri: Interesting. Is that a benefit design issue, you think? Or what's, what's driving that? Or what should the plan sponsor listening to this episode think about?
[18:00] Michael Kleinrock: It's important to have context. So when we've talked about the GLP-1s, for example, there's a lot of talk that you'll regain the weight if you don't stay on therapy. And we had a chart in the report where we found that basically GLP-1s have about, at the end of a year, about 30% of people are still on therapy. And you think, oh, oh, so 70% of that was a problem. Except that 30% is fairly typical across four other large chronic therapies.
At the end of the year, 30% of people staying on therapy is roughly what happens normally. What we haven't quite figured out as a society, as a system, is what happened to the other 70%. Is that an affordability question? Is that a clinical question? Did it not work? Did it work and they're done? All these kinds of questions you would expect with something that's a chronic maintenance condition, hypertension, cholesterol, the likelihood that you would be able to take something for a short period of time and be done and fixed is pretty low clinically. That's not how those things work. That's why we selected those classes in the analysis.
The idea would be that those are expected to be maintenance therapies, and that their patients are not. There is a breadcrumb for all of us to be thinking about how to retain and have persistence on therapy. Because some might say that's waste, right? Some might say that you started and you didn't finish. We didn't get anything for that. It's not waste that should be avoided. It's waste that we didn't finish the, the job.
[19:16] Justin Venneri: And somebody who worries a lot might think, oh, oh, boy, costs might go up in the future because you came off and you should have stayed on.
[19:22] Michael Kleinrock: Well, right? And so there's a risk that that patient's outcomes worsen because they're poorly managed, say in diabetes or in heart disease, and so on. Certainly that's one of our questions, is that if adherence were better, if adherence and persistence were better, we'd actually use more medicine, spend more on demand, and have better outcomes, all things being equal. But we don't.
And so there's a question, not about what an ideal situation is, but let's track the current, current and see how that's moving. That's what our report's trying to do every year, is really track the current trends and see what's going on. And we don't necessarily have an inflection in more abandonment, more affordability problems. But it's still here in pretty large numbers. Even for low-cost prescriptions, you have 10% abandonment. It's not like there's only high-cost drugs that are the problem. Patients are abandoning $20 prescriptions too.
[20:08] Justin Venneri: All right, Michael, I've got two more questions for you. First one, what's one other interesting insight or underappreciated thing you found in this year's report?
[20:16] Michael Kleinrock: So one thing we found is that Medicare patients saved a bunch of money. So for Medicare patients, because of the cap, the out-of-pocket cap, there's a group of patients whose spend is above the annual cap, and their costs went down. That's an important dynamic because they're generally retired. They're retired people usually. So their ability to absorb excess costs is more limited. The older folks in the audience sometimes say they're on a fixed income. Those patients saved something already, even before the 2026 implementation of price negotiation on the drugs that have started to be listed in that part of the policy. I think that's an important dynamic.
The other sort of underappreciated dynamic is that when you're seeing costs go into the system from a prescriber visit, we have stats here. 29% of new prescriptions are unfilled across payers. What is happening there in terms of those new prescriptions? We obviously have plans not covering certain medicines. We have ways patients navigate around that, either with a coupon program or with paying cash in some cases.
Also, with the cap in Medicare, there's an interesting group of patients, almost a million of them in Medicare, who still had costs above the cap. And what is happening there is they're not using their Medicare. What's happening is that they're using cash to pay for things that are not covered by Medicare. Some of them are not covered by law. So you couldn't get obesity drugs; that was the more common one for a few years. There's a slight policy change there, but most people aren't aware of it. There are also things like erectile dysfunction that are not covered by Medicare. The patients are sort of, "I'm a Medicare patient, but then I'm paying outside." By the way, that's not in the report, but it's a definite, true area: commercial patients have a similar dynamic. Their insurance covers some things, and it doesn't cover others. They go outside. Some of it is because of the drugs they need, some of it is because a store-based or an independent-based coupon program might offer them a better deal on a generic or a branded generic or something. And so they do that. Insurance not being the only way patients pay is definitely one of those underappreciated dynamics.
What's probably also important to say is that growth is not all obesity. We definitely have some looming savings coming in terms of patent expiries in the next few years. Obviously the price negotiation is going to start affecting more drugs each year. That's in effect. And overall the outlook for this double-digit growth is that it's going to slow.
We think it slows to about four and a half to seven and a half percent. That sort of range through 2030, which doesn't seem like a big reduction. I've been doing this analysis since growth in the US market was 1% or 2%; mid- to high-single-digit growth is still a big number, especially considering our population growth and economic growth and so on. There's still robust value being attributed to medicines and the use of those medicines and treatments across a whole range of diseases that we are seeing. And there's weird outlier upside potentially in there: we have more GLP-1 usage.
If we have drugs for MASH, it's this sort of liver function metabolic disease. If we have Alzheimer's therapies that are coming through the pipeline, if they are somehow more effective, if we have a range of, again, the large number of drugs that I mentioned that are growing pretty strongly, those all contribute, and they contribute to those individuals with better health outcomes, hopefully. And that's a big dynamic.
It creates some interesting pressures for all the stakeholders. It creates a pressure for how to keep a premium at the right level for plan design, and how companies who are covering their employees are going to offer a benefit that their employees are satisfied with. That squeeze in this economy is a tricky dynamic that we observe just as well as the rest of you. And I think that's what I'd see overall: we have this significant amount of innovation, really low average costs for most things, and those high-cost outliers. That sort of pushing of cost to the patient for a very high-cost drug is sort of an interesting challenge. And there's pretty strong demand. But there's this mixed story, and probably what I didn't even cover at all is just sort of that volume use sort of below expectations that has some mixed stories. We have really strong immunology and oncology growth. Vaccines were notably stronger than we would have thought.
[24:13] Justin Venneri: You know, as you were speaking there, it's wild, the transition in the market. And then I was thinking back to something Jim Winkler said talking about their survey and how everybody got used to, "Oh, it's unsustainable. The growth in costs is unsustainable." But after a decade or so of rising costs by double digits, we're like, wow. Now here we are talking about up another 10 and change percent year-over-year on a huge number going down. Of course some of that is a law of, it's a larger number, it's still getting bigger, but it's a smaller percentage point. It does seem like there's got to be a breaking point, but it just keeps going up every year because of the dynamics. It's crazy.
[24:48] Michael Kleinrock: Yeah. If we think about some of these therapies. So for immunology, in the last couple of years' outlook, I had an expectation that big patent expiries and biosimilars for Humira and Stelara would have, collectively, those two were the leading drugs in immunology. They were accounting for almost half of the spend in the whole market. And you think, okay, those biosimilars, we should save a bunch. In reality, the system collectively, everyone decided, you know what, the next generation of therapies across a range of immunology conditions is something that's worth spending on. And we've had some savings from biosimilars.
But what we've also had is a shift to the other novel therapies in psoriasis, Crohn's, ulcerative colitis, severe asthma, and a number of other areas. And so when you think about the sort of, are we going to sit pat and capture the savings or are we going to keep moving to the next thing? Because unmet need is a significant issue. It seems like we're seeing the unmet need doing better than the capture of the savings. And the same thing happens in oncology, where we see continued movement to newer therapies, and not just newer therapies, but those newer therapies have longer survival and longer treatment duration.
So the patients get to stay on therapy longer and have a regimen that includes that newer medicine but lasts them longer, and they live, which, again, sounds great. Let's do that. The trade-off between capturing savings and having something better seems to be tilting toward innovation, tilting toward the something better across a whole range of therapies. And that's great news for patients with those conditions. I mean, think about the migraine patients who have a number of new therapies in the past few years, where migraine was something that you would put a heating pad on your head and suffer with. What medicines did work for you? And now there's a number of new options, new mental health treatments, some new mechanisms. For the first time in decades. There's just so many pockets of innovation that we are seeing that I could be excited about them from reading the abstracts, but it's not just that, it's that the market is rewarding them financially, which suggests to me that they have both that clinical excitement and something that works for people.
That's what we're seeing here is the really interesting dynamic. And I think it's hard to say no to things that work for people. I think there's a temptation to consider that insurance and plans are here to say no. I don't think that's how it works. I think they're here to get the right value for their sponsors, but historically we have found ways to constrain spend, and it seems like the medicines are overcoming that.
[27:05] Justin Venneri: All right, last question. Michael, keep your compliance hat on for me. I know you've seen a lot over the years, and over the last year you've seen a lot, because of all the data you guys have access to. What was the most astonishing observation in this year's study? Send us off with a good story.
[27:16] Michael Kleinrock: I think the most astonishing part of this was how much the patient volumes in GLP-1s increased. It basically doubled during the year of 2025. For all of the media reporting and enthusiasm, I didn't think it could keep accelerating in the same way that it was doing in the past two or three years.
This started ramping up with social media influence and celebrity hype that has gone from strength to strength. And there's better clinical data coming out all the time from each of the companies. Looking forward, that one says to me, what are we going to see? Well, in our R&D Trends report back in March, we put out that there are almost 200 obesity drugs in development in some way, and so, success rates being what they are, I don't think we'll get 200, but there could be a number of options, and we've seen some more.
So we've seen oral options, we've seen different sort of maintenance options and different treatments. So there's choice. Choice leads to competition. Competition leads to lower prices potentially, you know, widespread use of the lower prices in terms of consumer-facing things, direct-to-consumer being this sort of new channel, whether it's the TrumpRx.gov or whether it's companies having their own direct shipment options for these therapies, those are not the system we've had. Those do not fit into the orthodox pharmacy, PBM, medical insurer mix. They fit into something else. So that's probably the most dramatic salvo, volley in the way the market's evolving, and it's sort of one of the more exciting things that's going on, as it's not involving every one of the traditional stakeholders.
The big number, the double digit for another year, and the real widespread, across multiple therapies, benefits that are accruing across the market, that's what I'm taking away.
[28:51] Justin Venneri: If somebody wants to learn more, send us off with the website. Where to find you, where to find more about the report.
[28:56] Michael Kleinrock: Okay, so you can go to iqvainstitute.org; that's IQV, A Institute, all one word, dot org, and we look forward to you turning up there.
And we should be having a webinar with some panelists discussing the report as well, coming in the next couple of weeks ourselves. So if you want a repeat of this, we definitely look forward to sending people over to that as well.
[29:17] Justin Venneri: Michael, thanks again for joining us. Have a great rest of your day.
[29:19] Michael Kleinrock: Thank you very much.
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