Drug Spending Still Under 10% of American Health Costs, Says Analyst

December 5, 2014

By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Drug spending is still under 10 percent of all American health care costs, despite the fact that more consumers are being prescribed medicine and spending has grown, said Mark Schoenebaum, a medical doctor and analyst at EvercoreISI Group, on Friday.

According to recently published data from industry tracking group HealthAffairs, drug spending was about 9 percent of total U.S. healthcare expenditures in 2013.

“In addition, total U.S. drug spending in 2013 grew at 2.5 percent, which was below the overall rate of healthcare spending growth (3.6 percent),” he wrote in a note to investors.

Newer, costlier medications to treat chronic, long-term diseases like hepatitis C will also push spending up as the Baby Boomer population ages.

“The pace of drug spending likely rose in 2014 as Hepatitis C drugs were introduced,” said Schoenebaum. “However, if expressed as a percentage of total healthcare costs, it likely remained quite modest.”

Utilization, measured as the number of prescriptions dispensed, increased 1.6% in 2013, accelerating slightly from growth of 1.2 percent in 2012. The wider availability of generic drugs also will keep spending down, hypothesized Schoenebaum.

“In 2011 the share of dispensed prescriptions that was generic (excluding branded generics) was 73 percent,” he said. “In 2012 it was 77 percent, and in 2013 it reached 80 percent.”