A recent report published by the United States Department of Health and Human Services (HHS) found that more than 1,200 pharmaceuticals increased at a rate greater than inflation from July 2021 to July 2022. The inflation rate was 8.5% while the average price increase of the 1,200 drugs was 31.6%.
Another report also found that Americans pay higher prices for prescriptions than any other country in the world, more than 2.5 times what other high-income nations pay, and about 1.9 times as high when rebates and other discounts are taken into account. The reports, both issued by HHS, looked at drug price increases and trends from 2016 through 2022. Last year, the United States spent $603 billion on prescription drugs (excluding any rebates) and of that $603 billion, $421 billion was spent on retail drugs.
Increases in Prices and Spending
HHS notes that spending growth on drugs was largely due to price growth in spending per prescription, though increased use (more prescriptions) was also a factor. Expenditure growth was larger for non-retail drug expenditures (25%) compared to retail expenditures (13%).
In the report, HHS notes that most price increases occur at the beginning of January (more than 3000 drugs in 2022, up from 2,650 in 2016). July is another popular month for price increases, though it had trended downward from 613 in 2016 to 203 in 2021. However, in July 2022, the number of increases were more on par with what we saw in 2016, with 601 price increases.
In January 2022, HHS found that the average price increase was about $150 per drug (10%) and in July 2022, it was $250 (7.8%). The dollar increases were larger than for the same months in prior years, in part because the July increases tended to be for higher priced drugs than those in January. Additionally, HHS notes that some drugs increased by more than 500% or $20,000 in 2022.
Of the more than 3,000 price increases in January and July 2022, 241 exceeded 10% and $20 while 248 exceeded $500.
Specialty drugs seemed to be driving much of the growth. In 2021, specialty drug spending totaled $301 billion, up 43% from 2016 numbers. This means that “Specialty drugs represented just about half of total drug spending in 2021. HHS noted that “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.”
Trends in Prescription Drug Spending
The reports also found that where people receive their prescriptions changed from 2016 to 2021. Americans started to use mail order pharmacies (35% increase), clinics (45% increase), and home health care (95% increase) to obtain prescriptions, and stopped using independent pharmacies (5% decrease), long term care facilities (17% decrease), and federal facilities (9% decrease).
The reports also found that prescription drug spending was not as impacted by the COVID-19 pandemic as health care services spending was.
The reports applaud a provision in the Inflation Reduction Act, the inflationary cap on Medicare Part D costs, which went into effect on October 1, 2022. The Inflation Reduction Act also gives Medicare the authority to negotiate prices for a small subset of drugs in Medicare Part B in 2026. “In recent years, prescription drug prices have skyrocketed, but thanks to the Inflation Reduction Act, America’s families will soon start seeing relief,” said HHS Secretary Xavier Becerra.