Drastic increase in prescription drug spending doesn't tell the whole story: CBO

Nationwide spending on prescription drugs soared from $30 billion in 1980 to $335 billion in 2018, the Congressional Budget Office said in a new report.

During that period, real per capita spending on prescription drugs also increased from $140 to $1,073, the budget office reported.

But the drastic spending increases do not tell the whole story, the CBO said. The increase was driven by the development and use of many types of drugs that have resulted in myriad health benefits. As a result of those new drugs, such as those treating cardiovascular conditions, there were decreases in other health costs, such as charges for hospital and physician visits.

And while other drugs, such as those that treat multiple sclerosis or cancer may not have offered such savings, they have improved the lives of those with chronic illnesses and potentially extended their lives, the CBO said.

The budget office said that prescription drug spending increased rapidly in the 1990s, with an increase in the number of “blockbuster” drugs that treat common conditions, such as high cholesterol or high blood pressure, which affect a large segment of the population.

However, per capita spending on prescription drugs leveled off in real terms during the mid-2000s and has fallen as a percentage of total health care spending since then. CBO attributed the slower growth to the availability of generic drugs that have much lower prices than their brand-name counterparts.

The period between 2013 and 2015 was an exception, CBO said.

The budget office also reported that:

• The average net price of prescriptions, after subtracting the discounts and rebates that manufacturers provide to private insurers fell from fell from $57 in 2009 to $50 in 2018 in the Medicare Part D program and from $63 to $48 in the Medicaid program.
• However, the average price of brand-name prescription drugs increased from $149 to $353 in Medicare Part D and from $147 to $218 in Medicaid.
• The share of spending on prescription drugs by consumers has decreased substantially; in 1990, consumers paid 57% of the prescription costs out of pocket. By 2009, the share had fallen to 20% and by 2018, it had fallen to 15%.
• The share of prescriptions consisting of generic drugs has seen a huge increase. In 2009, 75% of the prescriptions written were for generic drugs and by 2018, that figure has grown to 90%. CBO predicted that share growth may slow because the dispensing rate for generic drugs already is high and because newer brand-name drugs tend to be more costly to manufacture.
• The average price of a brand-name drug has grown, though. Between 2009 and 2018, the average price of a prescription for brand-name drug more than doubled in the Medicare Part D program.
• However, average prices for generic drugs fell from $22 to $17 in the Medicare Part D program.