Prescription Drugs

02/20/2020

Prescription drug spending continues to increase in the United States. The Office of the Actuary within the Centers for Medicare and Medicaid Services (CMS) estimates that in 2019, $360.3 billion will be spent on retail prescription drugs (net of rebates), rising from $265.2 billion in 2013. This increase has prompted many to discuss how to address this growing challenge. To inform this discussion, ASPE has conducted research into the magnitude of the recent rise in prescription drug spending, the relative importance of various factors that underlie it, and the contribution of drug spending to the overall rise in health care spending in recent years.

The drug market has many players that comprise the supply chain: manufacturers; pharmacies; physicians; private and public insurers; and ultimately patients (see Figure 1). Within federal programs, trends in prescription drug utilization and spending vary across the Medicare Part B, Medicare Part D, and Medicaid programs. Differences in utilization and spending reflect underlying variation in eligibility for each program, including age, disability, income, and medical need. The Medicare Program provides health insurance coverage for individuals aged 65 years and older as well as certain younger individuals with disabilities or with End-Stage Renal Disease. The Medicaid program is a joint Federal-State program that provides coverage for disabled individuals and individuals and families with low incomes; some individuals with incomes above these limits may also qualify due to high medical expenses.

This is a diagram which illustrates the flow of goods, services, and money between members of the pharmaceutical supply chain. Click image to go to the text version.
Figure 1 illustrates the flow of goods, services, and money between members of the pharmaceutical supply chain. View larger version of this flowchart.