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Drug-spending spike puts more strain on government and you

Prescription drugs in a shopping cart
Joel Saget | AFP | Getty Images

You might need to take a pill after reading about how much prescription drugs are costing us.

Spending on prescription medications "rose by a remarkable 12.6 percent in 2014" after years of modest growth, federal officials revealed Tuesday.

Growth in drug spending is believed to have "remained elevated in 2015," and even after slowing somewhat is expected to continue at a heated pace in the near future, officials said.

The projections indicated that prescription drug spending will eat up an increasing share of overall government and personal health budgets in coming years.

In 2015, the United States spent an estimated $457 billion on all prescription drugs, which is 16.7 percent of all personal health-care services — up 1.4 percentage points since 2013, according to an issue brief released by the office of the assistant secretary for planning and evaluation of the U.S. Health and Human Services Department.

The estimate includes spending both on retail prescription drugs and on medication directly administered by health providers.

The office also said that spending on prescriptions is projected to rise an average of 7.3 percent annually from 2013 through 2018.

That compares to an estimated rate of inflation for all health-care spending of an average of 5.2 percent annually during the same time period.

Most of the increases in drug spending since 2010 appear to be due to rising prices of medications, and shifts in the composition of drugs being prescribed toward higher-priced products, the office said. But another significant factor was an increase in the rate of prescriptions per person in the U.S.

Spending on specialty drugs "generally appears to be rising more rapidly than expenditures on other drugs," according to the issue brief.

The office also noted that the dramatic increase in drug spending came after years of relatively slow grow, particularly from 2008 through 2012, when drug spending inflation averaged just around 2 percent annually.

Officials did not estimate what the final drug spending inflation rate will turn out to be for 2015, but suggested it was in the ballpark of the rate seen in 2014.

And while "analysts do not expect the rates of increase seen in 2014 and 2015 to continue," they are projecting higher rates of drug spending inflation than was seen from 2008 through 2013.

By 2018, spending on all prescriptions drugs is projected to be $535 billion annually, or 16.8 percent of total personal health-care spending.

"The rising cost of prescription medicines is putting pressure on public and family budgets in the United States," the office said in its issue brief.

The office noted that a recent poll by the Kaiser Family Foundation "found that the affordability of prescription drugs tops the public's list of priorities for the president and Congress."

The issue brief pointed out that in some cases, the use of particular drugs might lead to reduced spending in other health sectors, such as in hospitals, because of "fewer acute health events occurring as a result of medication use."

But "evidence suggest that a rise in prescription drug therapy tends to raise" overall health expenditures "rather than lower them," the brief said.

Another issue brief released by the same office Tuesday said that Medicare's Part B program, which among other things covers infusible and injectable drug and biologic treatment by doctors, gives physicians "weak incentives" to consider lower-cost drug therapies to effectively treat a patient.

The brief said the federal Medicare program "has not implemented various value based practices typically used by commercial insurers" and the sponsors of Medicare's Part D prescription benefit program for self-administered drugs.

"There is growing concern that several features of the current Part B program do not create appropriate incentive for either providers, suppliers or patients to make high value choices among treatment options," according to the brief.

At the same time that brief was released, the federal Centers for Medicare and Medicaid Services announced that it is proposing to test new models "to improve how Medicare Part B pays for prescription drugs," suggesting those models might help lower drug spending in the program over time.

The proposed payment models would affect Medicare payments for many specialty drugs, said Dr. Patrick Conway, acting principal deputy administrator and chief medical officer of CMS.

During a briefing with reporters, Conway said the initial proposed changes to payment models were designed to be "budget neutral."

But in the future they might "lead to savings" by incentivizing doctors to use "higher-value drugs that provide better outcomes to patients," he said.