What are the recent and forecasted trends in prescription drug spending?


The cost of prescription drugs has become a hot-button issue with consumers and policymakers.  One in four people taking prescription drugs report difficulty affording their medication and recent Kaiser Family Foundation opinion polling has found bipartisan support for government action to lower prescription drug costs. This chart collection explores trends in spending on prescription drugs, and an earlier brief also explored trends in this topic.  

Growth in prescription spending has slowed again in 2016, after increasing rapidly in 2014 and 2015


In 2016, per capita retail prescription drug spending grew at a slow rate (0.6%), particularly in comparison to the previous two years when new specialty drugs came on the market. In 2015, pharmaceutical spending grew 8.1% on a per capita basis and in 2014 these costs had grown 11.5%. Looking ahead, CMS projections suggests growth in per capita drug spending will be moderate through 2026.

Estimates suggest that Rx drugs will continue to represent a larger portion of overall health spending


Retail prescription drugs had represented a shrinking share of total health spending through 2013, but increased in 2014 and 2015 with the introduction of some high cost specialty drugs. In 2016, drug spending did not grow as much as spending on other services, however, CMS projects that drug spending will continue to represent a larger portion of overall health spending over time.

Spending on prescription drugs has risen rapidly over past decades


On a per capita basis, inflation-adjusted retail prescription drug spending in the U.S. increased from $91 in 1960 to $1,019 in 2016.

Out-of-pocket spending for Rx drugs remained flat in 2016, while out-of-pocket spending on physician services grew


In 2016, per capita out-of-pocket spending on retail prescription drugs was similar to the previous year, however physician services are estimated to have increased slightly.

Most people taking Rx drugs say they can afford their treatment, but about 1 in 4 have a difficult time affording their medicine


About one in four people taking prescription drugs report difficulty affording their medication, and a recent Kaiser Family Foundation opinion poll found that 51% of voters consider a candidate’s plan to address prescription drug prices important to their vote in the 2016 presidential election.

Out-of-pocket costs for Rx drugs are expected to increase, but will likely represent a smaller portion of overall Rx spending


While per capita out-of-pocket spending on prescription drugs is expected to grow in coming years, it has fallen as a share of total drug spending and this trend is projected to continue into future years. Medicare is expected to represent a growing share of drug spending over the next decade.

Recent drug spending growth has largely been due to new brands, high prices for existing drugs, and fewer patent expiries


According to an analysis by IQVIA (formerly the IMS Institute for Healthcare Informatics) found that net spending on drug in 2016 was driven largely by the introduction of new brands and price increases for existing drugs still under patent protection. Compared to the previous two years, price increases for generic drugs did not play as much of a role in prescription spending growth in 2016. Additionally, high-cost specialty drugs used to treat hepatitis C had driven costs upward in 2014 and 2015, but significant decreases in the price of these drugs in 2016 lowered net drug spending. The report finds that the effect of patent expires has been largely unchanged over the past 3 years.

Costly new specialty drugs were a major driver of a recent spike in health spending


Several analyses identify specialty drugs as a primary driver of recent drug spending. Specialty drugs are used for the treatment of complex, chronic, or rare conditions such as cancers and hepatitis C. The Express Scripts 2016 Drug Trend Report indicates that the traditional drug trend (utilization and cost) decreased from 6.4% in 2014 to -1.0% in 2016 after an over 2.5 times increase from 2013 to 2014. The trend for specialty drugs jumped over 2 fold from 2013 to 2014, decreased 42% from 2014 to 2015, and recently decreased another 25% from 2015 to 2016.

Diabetes medicines topped traditional drug spending in 2016, more than doubling spending for the second leading category


The Express Scripts 2016 Drug Trend Report found that in 2016, diabetes medications remained the most expensive of the top ten traditional therapy classes, ranked based on per-member-per-year (PMPY) spending. PMPY spending on diabetes medications was $108.80 in 2015, followed by $51.64 for pain/inflammation drugs, and $38.45 for high blood cholesterol medication. Due to a 76.4% drop in PMPY spending from 2015 to 2016 on compounded drugs (attributed to regulation of unnecessary and high-cost compounded therapies) and to a 32.0% decrease in the unit cost of mental/neurological disorder drugs (largely resulting from the introduction of a generic), compounded drugs and mental/neurological disorders were replaced as top traditional therapy classes by depression and contraceptives.

Medications for inflammatory conditions and multiple sclerosis topped specialty drug spending in 2016


Medications for inflammatory conditions (rheumatoid arthritis, psoriasis) accounted for 39% of spending among the top 5 specialty drug therapy classes reported in the Express Scripts 2016 Drug Trend Report. Medications for hepatitis C were new to the top 10 list in 2014 when spending for just three new hepatitis C medications accounted for 96.4% of total spending for this class of treatment. With the introduction competing therapies and the initial wave of hepatitis C patients completing curative treatment with these medications, spending growth on hepatitis C medications slowed to 7 percent in 2015 and -34% in 2016.

Growth in price and utilization of pharmaceuticals has varied over the past 2 decades


For much of the past two decades – with the exception of the period surrounding the economic downturn – growth in utilization outpaced growth in pharmaceutical prices. The price index for drugs has held relatively stable since the mid-1990s (ranging in growth from about 1% to 5% annually), while the utilization index has changed more over time. Due to the way drugs are selected for inclusion in the price index, it can take some time for new drugs to be incorporated into the index.

Generic drug prices have declined while branded drug prices have nearly doubled in price


While generic drug prices have decreased over time, there have been some increases during the 2008-2016 time period. According to data from Express Scripts, instances of generic drug price inflation have been due to manufacturer consolidation (fewer manufacturers producing the generic) and/or temporary shortages of active ingredients needed to produce the generic drug.

The average price of Humira in the United States is about 96% higher than in the United Kingdom


Humira, prescribed to treat rheumatoid arthritis, is priced 96% in United States than in the United Kingdom, according to data from the International Federation of Health Plans. The average price of Humira in the U.S. is 225% higher than in Switzerland.

The average price of Xarelto in the U.S. is more than double the price in the United Kingdom


Xarelto, a drug prescribed to prevent or treat blood clots, is priced more than twice as high in the United States, on average, than in the United Kingdom or Switzerland.

The average price of Harvoni in the U.S. is 42% higher than in the United Kingdom


Harvoni, a high-cost specialty drug prescribed to treat Hepatitis C, is priced 42% higher in the United States, on average, than in the United Kingdom and 90% higher than in Switzerland.

The average price of Truvada in the United States is 44% higher than in Switzerland


Truvada, prescribed to treat HIV/AIDS, is priced 44% higher in the United States, on average, than in Switzerland, and 89% higher than in the United Kingdom.

The average price of Tecfidera in the United States is 174% higher than in Switzerland


On average in the United States, Tecfidera (prescribed to treat relapsing multiple sclerosis) is priced 174% higher than in Switzerland, and 668% higher than in the United Kingdom.

The average price of Avastin in the United States is 124% higher than in Switzerland


Avastin, prescribed to treat some cancers, is priced 124% higher in Switzerland, on average, and 125% higher than in the United Kingdom. Unlike some other drugs included in the International Federation of Health Plans, the price range for Avastin is relatively large; the 25th percentile was $2,289 and the 95th percentile was $8,831 in 2014.

Drugs count for a bigger share of health spending than many think


In 2013, prescription drugs accounted for 10% of U.S. health spending but 19% of employer insurance benefits. That is not much less than the 23% employers spent on inpatient hospital care.

Medicare has become a major payer for prescription drugs


With the launch of Medicare Part D in 2006 and more recently the ACA’s closing of the “Donut Hole” (a prescription drug coverage gap resulting in Medicare enrollees paying out-of-pocket in addition to their deductible and copayments or coinsurance), Medicare has become a major payer for prescription drugs. From 2005 to 2016, Medicare’s contribution to total national health spending on prescription drugs jumped from just 2% to 29%, making it the second largest contributor to drug spending after private insurance.

Most Americans favor action to keep drug prices down


When asked about policy options for keeping prescription drugs cost down, 86% of Americans favored requiring drug companies to report on how drug prices are set. Eight-two percent favored allowing Medicare to negotiate with drug companies for lower drug prices, 78% favored limiting prices for high-cost drugs (e.g., for cancers and Hepatitis C), and 71% favored allowing the purchase of drugs imported from Canada.