The rising cost of prescription drugs is a key driver of overall healthcare spending in the U.S. This trend has significant implications not only for Americans who rely on medications but also for our nation’s budget and fiscal outlook. Recent proposals to reduce such costs indicate a bipartisan desire to curb growth in prescription drug prices, but there has been a lack of consensus on the exact path forward.
The Total Cost of Prescription Drugs Is Projected to Continue Climbing
U.S. spending on prescription drugs has grown rapidly over the past decade, climbing from $783 per capita in 2007 to $1,025 per capita in 2017. The Centers for Medicare and Medicaid Services project that such spending will continue climbing to $1,635 per capita by 2027, an increase of 60 percent. Overall, the U.S. spent about $330 billion on prescription drugs in 2017 — a 40 percent increase from 2007. That total includes both public and private spending, meaning it includes both out-of-pocket costs by Americans as well as costs borne by insurance companies and government programs like Medicare.
The growth in aggregate spending on prescription drugs can be attributed to several factors, such as the number and type of drugs prescribed (for example, specialty drugs are typically much more expensive than other drugs). The price of prescription drugs.
Why Are Prices for Prescription Drugs Rising?
Several factors may be contributing to the rise in prescription drug prices. One notable driver is a lack of competition resulting from the U.S. patent system for brand-name drugs, which gives the manufacturer monopolistic control over a given market and therefore the ability to increase prices without competition. Even though brand-name drugs account for only 10 percent of the prescription drug market, spending on such drugs accounts for almost 80 percent of total prescription drug costs, according to an analysis by IQVIA. Furthermore, prices on brand-name drugs have increased by over 60 percent since 2014, according to the Peterson-Kaiser Health System Tracker.
Other factors commonly cited as contributors to rising drug prices include:
- A lack of transparency in drug prices
- Less competitive drug markets stemming from mergers and acquisitions among manufacturers
- The limited ability of other parties, such as Medicare, to negotiate drug prices
Why Are Rising Drug Prices an Issue?
Prescription drugs play a vital role in the U.S. healthcare system — enabling Americans to lead longer, higher-quality lives. However, the value of such drugs can be diminished if people are unable to afford them. In fact, 24 percent of people taking prescription drugs noted that they had difficulty affording their medication, according to a poll by the Kaiser Family Foundation. That finding was more pronounced for lower-income individuals as well as for those nearing retirement age.
Prescription drugs also play a sizable role in the cost of the U.S. healthcare system, accounting for 10 percent of total health expenditures. Furthermore, those expenses are increasingly occurring through government healthcare programs such as Medicare and Medicaid — placing an additional strain on the federal budget. In 2000, government healthcare programs paid for 20 percent of prescription drug expenses. By 2017, that number had increased to 43 percent; it is expected to climb further to 49 percent by 2027.
For more information- visit the Peter G. Peterson Foundation (pgpf.org)
List of covered prescription drugs (formulary)
Most Medicare drug plans have their own list of covered drugs, called a formulary.
Plans cover both generic and brand-name prescription drugs. The formulary
includes at least 2 drugs in the most commonly prescribed categories and classes.
This helps make sure that people with different medical conditions can get the
prescription drugs they need.
All Medicare drug plans generally must cover at least 2 drugs per drug category,
but plans can choose which specific drugs they cover. Plans are required to cover
almost all drugs within these protected classes: antipsychotics, antidepressants,
anticonvulsants, immunosuppressants, cancer drugs, and HIV/AIDS drugs.
The formulary might not include your specific drug. However, in most cases, a
similar drug should be available. If you or your prescriber (your doctor or other
health care provider who’s legally allowed to write prescriptions) believes none of
the drugs on your plan’s formulary will work for your condition, you can ask for an
exception.
More information on Medicare.gov. Download 8pg booklet below.