Prescription drug spending rise expected to eclipse pace of overall health spending

Rising prices and big-dollar medications are leading to increases in prescription drug spending, the Department of Health and Human Services has found.

Not only are expenditures rising, but they're projected to continue rising faster than overall health spending; from 2013 to 2014, drug spending rose by an estimated 12.6 percent, ending a slowdown period that had started in 2008. Drug spending is projected to jump from $424 billion in 2014 to $457 billion in 2015, said HHS.

The Office of the Assistant Secretary for Planning and Evaluation estimates that the $457 billion mark represents 16.7 percent of overall personal healthcare services. Of that, 71.9 percent, or $328 billion, was for retail drugs, while 28.1 percent ($128 billion) was for non-retail drugs.

Drug spending represented just 15.3 percent of healthcare services in 2013, and in the 1990s, only seven percent.

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The authors cite a rising number of prescriptions as one factor in the jump. The total number of prescriptions increased by 11 percent from 2010 to 2015, from 3.5 to 3.9 billion. Most of that growth was attributed to more drugs being prescribed per person, while the rest of the growth resulted from an overall population increase.

But overall spending rose faster than the number of prescriptions, HHS found. That suggests that higher prices were a major factor as well, which is supported by the numbers: Drug spending rose by 26 percent over that five-year same period, from $356 billion to $424 billion.

With total expenditures rising more quickly than the number of prescriptions, the authors hint that prices are growing faster than quantities -- which means price changes are contributing more to the growth in spending than is growth in prescription volume.

"By itself, the change in prices for the total set of prescribed drugs increased retail drug spending by an estimated 15 percent during the last five years," the authors wrote. "Economy-wide inflation rose by only about 7 percent from 2010 to 2014, so roughly half of the rise in average drug prices during that period represents growth in excess of overall inflation."

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Another contributor is the shift toward more expensive medications, although some former name-brand drugs lost their patent protections and faced competition from generic alternatives.

"The number of brand-name drug prescriptions actually fell from 2009 to 2015, by a cumulative 42 percent," the authors wrote. "Revenues for brand-name drugs, however, were relatively flat during most of that period, and ended about 13 percent higher; that 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.

"The pattern for generic drugs was notably different. The number of prescriptions rose substantially, by a cumulative 36 percent, and expenditures nearly doubled."

The authors offered an itemized breakdown of what they perceive as the underlying factors in the rise in prescription drug spending: 10 percent of it, they said, was due to population growth; 30 percent to an increase in prescriptions per person; 30 percent to overall, economy-wide inflation; and 30 percent to either more expensive drugs being prescribed or drug-price increases.

Twitter: @JELagasse