Prescription drug costs soaring

screenshot_27910 selected new medications are likely to result in medication costs to the government of $49.3 billion over a 10-year period, including: $31.3 billion in Medicare spend; $15.8 billion in state and federal Medicaid spend; and $2.1 billion as a result of subsidies provided through exchange plans.

Spending on pharmaceuticals grew 13.1 percent in 2014, with nearly half of this growth driven by new products launched in the last two years, primarily specialty therapies.1 While medications accounted for approximately 13 percent of healthcare spending in 2013, year- over-year drug trend between 2013 and 2014 was at its highest level since 2001. These spending trends raise questions for government programs and other payers who must balance the potential long-term budget impact of new medications with improvement in patient care.


National health spending comprises several components, including hospital care, physician services, nursing facilities, durable medical equipment, and prescription drugs. In 2013, retail drugs represented 9.3 percent of total national health expenditures, not accounting for drugs purchased outside the retail setting, such as those used in hospitals or other facilities.4 When accounting for nonretail spending, the Altarum Institute estimates that drug costs represented approximately 13 percent of national health expenditures in 2013 or $381 billion.


Overall, the portion of national health spending attributable to prescription drugs has remained relatively constant in recent years.

What can pharma do?

Pharma is currently an industry in crisis.  Patent expirations, increased costs for R&D, the exodus of talent and a bill that will come due for M&A activity mean that biopharma companies need to watch spending as well as increase company coffers.  It’s logical to believe that both HCP’s and government officials are going to raise their voices at the high prices of new prescription drugs despite their value to patients.


Rather than respond to criticism of high drug prices the industry should band together and state that no patient will be left behind because of the cost of new medications.  This means that patients get the needed medications if and when they can’t afford them without any questions.  The industry has to ensure that no patient is turned away because they can’t afford a prescription drug.  The current programs are just a dip in the water. Pharma needs to step up and make free drug programs more liberal and easy to apply for.