Prescription Drug Spending Shows No Signs of Slowing

Prescription drug spending expected to increase from 2017 to 2025 due to costly specialty drugs.

According to the report published by Health Affairs, national health expenditure growth is expected to increase an average of 5.6% each year between 2016 and 2025.

The estimates by the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary were created based on current laws, and do not account for potential changes that may be implemented, according to a press release from the CMS.

The investigators projected that national health spending growth will surpass gross domestic product (GDP) growth by 1.2%. The researchers also expect that the health share of GDP will increase to 19.9% in 2025, up from 17.8% in 2015.

The authors also found that growth in national health expenditures during this period is primarily impacted by increased growth in drug costs after a period of historically low growth, according to CMS. However, the faster growth may be offset by slowed usage and intensity of medical goods and services.

In 2016 alone, the investigators predict that health spending reached $3.4 trillion, which was nearly 5% higher than the previous year. Additionally, state and local government financing for national health spending is only expected to increase to 47% by 2025, which is an increase of 1% from 2015.

Overall, growth is projected to be 4.8% in 2016, which was 1% slower than the previous year, and is attributed to a downturn in Medicaid and prescription drug spending. By 2017, the researchers predict spending to reach 5.4% due to increased private insurance spending.

Faster spending growth for Medicare and Medicaid is expected to be a main contributor to the growth in national health expenditures, which is expected reach an average of 5.8% between 2018 to 2025, according to the report.

Although Medicare spending was only expected to be 5% in 2016, it is projected to increase to 7.1% by 2025. This phenomenon was reported to be driven by higher utilization of Medicare services. This results in a 4.1% growth in Medicare spending per beneficiary between 2016 and 2015.

The authors reported that spending growth on private health insurance was expected to decrease from 7.2% in 2015 to 5.9% in 2016 as a result of slower enrollment. In 2017, spending on private insurance is expected to increase up to 6.5%, with increased premium growth in Affordable Care Act marketplaces and the elimination of temporary risk corridors, according to the study.

The investigators projected that Medicaid spending growth plummeted to 3.7% in 2016 from 9.7% in 2015. However, growth is expected to increase to 5.7% per year from 2017 to 2025. These dramatic changes are likely due to faster per enrollee spending, which is influenced by patients who are older, disabled, and those who utilize costly services.

Medical prices are expected to skyrocket from 0.8% in 2015 to 3% by 2025. This rapid growth is influenced by economy-wide prices and medical specific prices, but is expected to be moderately offset by slower utilization and intensity of medical goods and services, according to the report.

Despite concerns of high drug costs, CMS reported that drug spending is expected to have been 5% in 2016, which is significantly below the 2016 rate of 9%. This slowing trend is due to the decreased use of costly hepatitis C virus drugs, which can cost thousands for 12 weeks of treatment.

Spending on prescription drugs is expected to increase slights to 6.4% for 2017 to 2025 due to spending on costly specialty drugs, according to the study.

“After an anticipated slowdown in health spending growth for 2016, we expect health spending growth to gradually increase as a result of faster projected growth in medical prices that is only partially offset by slower projected growth in the use and intensity of medical goods and services,” said study first author Sean Keehan. “Irrespective of any changes in law, it is expected that because of continued cost pressures associated with paying for health care, employers, insurers, and other payers will continue to pursue strategies that seek to effectively manage the use and cost of health care goods and services.”