Wendy future of retail top

Prescription drugs fuel rise in health spending

Print Friendly, PDF & Email

HHS report cites higher-priced medications as key factor

pharmacy-2
WASHINGTON — U.S. spending on prescription drugs is projected to continue climbing faster than overall health care expenditures, according to a new report from the Department of Health and Human Services (HHS).

In 2015, U.S. prescription drug spending totaled $457 billion, up 7.8% from $424 billion in 2014, which had represented a 12.5% year-over-year increase. Retail prescription drug spending accounted for 71.9% of total drug expenditures in 2015, while non-retail drugs — including specialty drugs — were 28.1% of overall drug outlays.

Last year, retail prescription drug expenditures grew 7.5% to $328 billion from $305 billion in 2014, according to the “Observations on Trends in Prescription Drug Spending” report from HHS’ Office of Assistant Secretary for Planning and Evaluation (ASPE). Non-retail drug spending came in at $128 billion, up 7.6% from $119 billion the prior year.

Nationwide, prescriptions totaled 3.95 billion in 2015, up 0.8% from 3.92 billion the previous year, according to ASPE estimates based on IMS Health data. Year-over-year prescription growth has averaged 2.7% for the past five years.

HHS reported overall U.S. health care spending of $2.73 trillion for 2015, up 5.1% from $2.60 trillion in 2014. Prescription drugs represented 16.7% of total health care outlays last year, up from 16.3% in 2014. Retail prescription drugs were 12% of overall health spending, compared with 11.8% in 2014, and non-retail prescription drugs accounted for 4.7% of 2015 health spending, up slightly from 4.6% in 2014.

Prescription drug spending is forecast to reach $535 billion in 2018, with a growth rate of 7.3% over the period of 2013 to 2018, the report said. Meanwhile, overall health care spending is projected to grow 5.2% in that time frame, climbing to $3.18 trillion by 2018.

HHS Drug Spending Report chart_March2016

Source: ASPE analysis of IMS Health NPA data, Oct. 2009 to Sept. 2015.

“Expenditures on prescription drugs are rising and are projected to continue to rise in the coming years as a share of total health care spending,” the HHS ASPE report said.

“The number of prescriptions is rising, but the majority of the growth in retail drug spending appears to be related to rising prices and changes in the composition of drugs prescribed — e.g., a general shift toward more expensive prescriptions — rather than changes in the total quantity of prescriptions.”

Between 2010 and 2014, factors behind the increased prescription drug spending include population growth (accounting for about 10% of that growth); more prescriptions per person (30%); economy-wide inflation (30%); and either more prescribing of higher-price products or drug price increases (30%).

Branded drugs have declined in terms of share of all retail drug spending and prescriptions, the report noted. Brand-name medications (including multisource drugs) were 68% of retail drug expenditures in 2009 but have since seen their share decrease steadily and level off at around 53% between 2013 and 2015.

The number of branded prescriptions dropped by a cumulative 42% between 2009 to 2015, with revenue relatively flat over most of that period and ending about 13% higher, which the HHS ASPE report said “implies a combination of rising prices for brand-name drugs and a shift toward more expensive products among the declining number of brand-name prescriptions.”  At the same time, the number of generic prescriptions grew by a cumulative 36% and revenue nearly doubled, fueled in large part by the “patent cliff” as many blockbuster drugs lost patent protection.

“Not surprisingly, prescriptions for generic drugs have increased while those for brand-name drugs have declined,” the report observed. “The shift toward more generic drug use confers substantial savings to the health care system.”

During the 2009-2015 period, specialty drug spending advanced from $14.5 billion to $27.1 billion, an average annual growth rate of 11%, according to ASPE estimates based on IMS data. In terms of retail prescription drug spending share, specialty drugs rose from 5.7% in 2009 to 7.6% in 2015, representing a 33.3% gain in share. Specialty drugs are estimated to account for about 12% of all the growth observed in retail drug spending during that time.

“Expenditures on specialty drugs appear to be rising more rapidly than expenditures on other drug products, though estimates of the level of spending on specialty drugs and the net contribution to overall spending growth are highly sensitive to which drugs are considered to be ‘specialty drug’ products,” the ASPE report pointed out.

Clearly, rising prices for prescription drugs remains a national concern, HHS noted. A recent poll of more than 1,200 U.S. adults found that the affordability of prescription drugs tops the public’s list of priorities for the President and Congress, including “making sure that high-cost drugs are affordable to those who need them” and “government action to lower prescription drug prices,” the report said. Seventy-seven percent of adults think that “making sure that high-cost drugs for chronic conditions, such as HIV, hepatitis, mental illness and cancer are affordable to those who need them” is a leading priority.

“The rising cost of prescription medicines is putting pressure on public and family budgets in the United States,” the HHS ASPE report said. “Many new drug products confer enormous clinical benefits to patients, but the cost associated with some of these therapies may place a financial strain on patients who might face high out-of-pocket costs even if they are insured. In addition, spending on prescription drugs contributes to overall health care spending growth and creates pressure on this portion of federal and state budgets.”


ECRM_06-01-22


Comments are closed.

Centrum 7/6  banner