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 2017, after increasing rapidly in 2014 and 2015
In 2017, per capita prescription drug spending slightly decreased (down 0.3%) for the first time since 2012. In 2015, pharmaceutical spending grew 8.1% on a per capita basis and in 2014 these costs had grown 11.5%, particularly because new specialty drugs came to market. Looking ahead, CMS projections suggests growth in per capita drug spending will be moderate through 2027.
Estimates suggest Rx drugs will represent a similar portion of overall health spending over time
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 2017, drug spending did not grow as much as spending on other services, however, CMS projects drug spending as a portion of overall health spending will remain consistent 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 $90 in 1960 to $1,025 in 2017.
Out-of-pocket spending for Rx drugs remained flat in 2017, while out-of-pocket spending on hospital and physician services grew
In 2017, per capita out-of-pocket spending on prescription drugs was down slightly from the previous year ($144 per person in 2017 and $145 in 2016). However out-of-pocket spending on physician services increased (from $182 per person in 2016 to $185 in 2017), as did hospital out-of-pocket spending (from $99 per person in 2016 to $104 in 2017).
Most people taking Rx drugs say they can afford their treatment, but about 1 in 4 have a difficult time affording their medicine
Among adults who currently take a prescription drug, 24 percent report difficulty affording their medication (including 15% who say it is somewhat difficult and 9% who say it is very difficult to afford their prescriptions).
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) net spending on drugs in 2017 was driven largely by the introduction of new brands and price increases for existing drugs still under patent protection. Compared to the previous years, the price of generics had a downward effect on overall drug spending. The report finds that the effect of patent expiries has been largely unchanged over the past four 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 drug spending in 2014 and 2015. Specialty drugs are used for the treatment of complex, chronic, or rare conditions such as cancers and hepatitis C. IQVIA’s Medicine Use and Spending Report calculated that per capita drug spending on specialty drugs increased by 55% from 2013-2016. Since it has tapered off in the past two years, overall per capita drug spending has began to decrease (down 2.2% in 2017).
Related Content:
For enrollees on private insurance, medicines for inflammatory conditions topped drug spending in 2018
The Express Scripts 2018 Drug Trend Report found that in 2018, medicines for inflammatory conditions were the most costly therapy class drugs, ranked based on per-member-per-year (PMPY) spending. PMPY spending on inflammatory conditions medications was $174.45 in 2018, followed by $114.85 for diabetes medications, and $80.24 for oncology drugs. PMPY spending on most of the top five therapy classes, diabetes excluded, is driven primarily by spending on specialty drugs.
Growth in price and utilization of pharmaceuticals has varied over time
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. 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. 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.
Prices for common generic drugs have dropped by 37% since 2014, while branded drug prices have increased by over 60%
Over the past five years, prices for brand drugs have increased on average, while prices for generics have generally decreased. There have been some instances of generic drug price increases since 2014, due in part to manufacturer consolidation (fewer manufacturers producing the generic) and/or temporary shortages of active ingredients needed to produce the generic drug.
Among commonly used specialty drugs, branded drug prices have increased by 57% since 2014
Among the most commonly used specialty drugs, prices for branded drugs have risen by 57% since 2014, while prices for generic drugs dropped by 35%.
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 2017, prescription drugs accounted for 10% of U.S. health spending but 21% 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 2017, Medicare’s contribution to total national health spending on prescription drugs jumped from just 2% to 30%, making it the second largest contributor to drug spending after private insurance.
The majority of Americans favor most actions to address high prescription drug prices
When asked about current policy options aimed at keeping prescription drugs cost down, a majority of Americans favored each option except for allowing Medicare drug plans to exclude more drugs (favored by 25%). Eighty-eight percent favored requiring drug companies to include list prices in ads, 88 percent favored making it easier for generic drugs to come to market, and 86 percent favored allowing Medicare to negotiate with drug companies for lower drug prices.
The Peterson Center on Healthcare and KFF are partnering to monitor how well the U.S. healthcare system is performing in terms of quality and cost.
