Drug Prices Rising and Aren’t Expected to Go Down

A report from data firm IMS Health showed that U.S. spending on prescription drugs rose 8.5% last year, primarily driven by the growing use of ultra-expensive new drugs and the rising prices of other medicines.

Estimates showed that patients, insurers, and government programs spent a combined $309.5 billion last year on prescription medicines. The IMS Institute forecasted that the annual increase in U.S. prescription drug spending will slow to 4 to 7% through 2020 but will reach $370 billion to $400 billion by that year.

Totals were reached based on net process paid after deducting discounts and rebates. In the past, this report has come without those deductions.

Between over-prescribing leading to opioid addition and overdoses and the unaffordable drug prices for necessary medications, there has been mounting criticism of the industry at large coming from doctors, patients, insurers, and Congress.

The increase in drug spending can be attributed to several factors, including rising prices, fewer big drug names getting generic competition, and a 10% increase last year in the amount of prescriptions being filled (up to 4.4 billion).

Murray Aitken, the institute’s executive director, said, “We have more people with health insurance, and that could be as reason we’re having more uptake in brand-name drug use.”

Indeed, about 20 million people are insured under the Affordable Care Act. Most of them are getting low cost generic drugs, said Aitken. About 48% of Americans have used at least one prescription drug in the past month; as more people become insured, this percentage is sure to rise as well.

One area where rising costs were particularly noted was specialty medicines, which contributed 70% of the overall increase in pharmaceutical spending from 2010 to 2015, as the study found. This includes treatments for ailments like hepatitis and cancer.

The nation’s attention was on the pharmaceutical company last year, when Martin Shkreli,the CEO of Turing Pharmaceutical, raised the price of a six-decade-old drug by 5,000%. However, the bigger picture is a little more nuanced than that.

“It’s fair to say a few companies and a few price increases have garnered a huge amount of attention,” said Aitken. “Without diminishing the significance of them, it misses the broader point of what’s happening in the overall market.”

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