Prescription drug expenses seen steady for next decade

The United States spent $2.9 trillion on healthcare last year. Hospitals make up the single-largest share (31%) of the total, followed by doctors and clinics (20%) and prescription drugs (9%). Yet this picture is somewhat misleading.

About $109 billion in prescription drug spending last year was obscured within the $2.9 trillion total for U.S. health spending released by federal officials this fall, economists with the Altarum Institute said in a new report.

The federal figures do not report drugs administered by clinicians in hospitals, clinics and elsewhere in the official total for prescription drugs, which instead limits the tally to retail sales that totaled $272 billion last year.

So combined, spending on drugs—regardless of how medication was dispensed—totaled $381 billion, or 13.1% of U.S. health spending in 2013, the Altarum report said.

Prescription drug spending as a percentage of U.S. health expenditures will hold around 13% for the next decade, Altarum estimates.

To project how that may change during the next decade, Altarum economists analyzed spending growth. Perhaps unsurprisingly, the analysis looked closely at specialty drugs, or medications that typically come with a high price tag.

Specialty drugs account for nearly one-third of the U.S. prescription drug market, said Charles Roehrig, an Altarum Institute health economist who conducted the report.

Drugs administered in hospitals and clinics (think chemotherapy) account for more than half of specialty drug spending, but are growing more slowly than retail specialty drugs, he said. The high-priced hepatitis C drug Sovaldi is one reason why. The drug is on track to generate $10 billion in sales this year, 88% of which will be retail, he said.

Fortunately, anemic growth in traditional drug spending has offset increased specialty drug expenses in recent years. Traditional drug spending slowed as blockbuster drugs lost patent protection.

The report was funded by the Pharmaceutical Research and Manufacturers of America.

Follow Melanie Evans on Twitter: @MHmevans