In 2021, the U.S. health care system spent $603 billion on prescription drugs, before accounting for rebates, of which $421 billion was on retail drugs. Spending growth on drugs was largely due to growth in spending per prescription, and to a lesser extent by increased utilization (i.e., more prescriptions). Expenditure growth was larger for non-retail drug expenditures (25%) than for retail expenditures (13%). Between 2016 and 2021, the location where people received their drugs changed. Americans increasingly received their drugs from mail order pharmacies (35% increase), clinics (45% increase), and home health care (95% increase). During the same time period, there were decreases in drugs received through independent pharmacies (5% decrease), long term care facilities (17% decrease), and federal facilities (9% decrease). Drug spending is heavily driven by a relatively small number of high-cost products. The cost of specialty drugs has continued to grow, totaling $301 billion in 2021, an increase of 43% since 2016. Specialty drugs represented 50% of total drug spending in 2021. While the majority (80%) of prescriptions that Americans fill are for generic drugs, brand name drugs accounted for 80% of prescription drug spending in both retail and non-retail settings, with little change over time. The top 10% of drugs by price make up fewer than 1% of all prescriptions, but account for 15% of retail spending and 20%-25% of non-retail spending. Prescription drug spending trends have been less affected by the COVID-19 pandemic than health care services. Several provisions in the Inflation Reduction Act address drug pricing, including allowing the Secretary of HHS to negotiate prices in Medicare Parts B and D for selected medications and introducing Medicare rebates for drug prices that rise faster than inflation. These provisions may impact future drug spending trends.
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