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U.S. Drug Spending Hits Record High (Again)

Controversial Former Pharmaceutical CEO Martin Shkreli Testifies On Oversight In Drug MarketControversial Former Pharmaceutical CEO Martin Shkreli Testifies On Oversight In Drug Market
It's not just price gouging. Photograph by Mark Wilson via Getty Images

For the third year running, total drug spending in the U.S. reached an all-time high in 2015. Hospitals and pharmacies shelled out $424.8 billion on drugs, up 12.2% from 2014’s record mark, according to new data from the IMS Institute for Healthcare Informatics. After adjusting for rebates and other discounts offered by pharmaceutical companies, spending totaled $309.5 billion, 8.5% higher than the previous year.

That trajectory that will surprise no one who follows the news, or the bipartisan campaign-season bashing of the nation’s sky-high prescription drug prices. But the report also includes some interesting and—dare we say—even mildly hopeful context on the larger trend.

Driving more than half the growth in drug spending in 2015 were sales of new branded medications that have been available for less than two years. These products—largely innovative and pricey specialty medications that include breakthrough Hepatitis C treatments and immuno-oncology drugs—reflect the increased productivity and improved pipelines of pharma’s R&D departments in recent years.

By contrast, while the cost of older, branded pharmaceuticals continue to rise and contribute to increased spending, when discounting is considered, prices of these drugs increased, on average, 2.8% in 2015, the lowest growth rate in years. Roughly 80% of the spending growth on these patent-protected drugs was offset by rebates and price concessions.

Why the reprieve from crazy price hikes? “What this shows is that increased competition among manufacturers, the aggressive negotiations by pharmacy benefits managers, and to some extent the significant public discussion about drug pricing and prices have all contributed to a relatively modest level of growth in 2015,” says Murray Aitken, Executive Director of the IMS Institute. The soaring costs of older generic drugs seen in recent years was also less a factor in spending growth in 2015.

Other trends in the new report worth noting:

  1. Prescriptions are up: The total number of prescriptions written edged up 1% to 4.37 billion in 2015, driven largely by Affordable Care Act coverage. Demand was especially strong for antidepressants as well as respiratory, diabetes, and anti-epileptic drugs.
  2. Patients are paying more: Patients spent $44 on average for a branded prescription drug in 2015, up more than 25% from 2010. Aitken says these rising out-of-pocket-costs reflect the greater number of patients on health plans with a pharmacy deductible.
  3. Nurse practitioners and physician assistants are a huge and growing force in U.S. healthcare: In 2015, they wrote 17% of all retail prescriptions, up from 9% in 2010.
  4. There are more places to go: From independent urgent care centers to walk-in pharmacy clinics, patients have a wider range of options when seeking treatment. The number of healthcare facilities across the U.S. increased 28% since 2010. Though the number of retail pharmacy clinics has doubled since then, they still account for just 0.4% of healthcare-providing facilities.