A 10-Year Projection of the Prescription Drug Share of National Health Expenditures, Including Non-Retail

The latest forecast of national health expenditures (NHE) by the Centers for Medicare & Medicaid Services (CMS) has prescription drug spending comprising 10.1% of national health spending in 2015 and increasing to 10.8% in 2025. In these data, spending on prescription drugs is limited to retail purchases from various outlets, including chain stores, food stores, independent pharmacies, and mail service. A more complete picture of spending on pharmaceuticals would include drugs that are administered during encounters with health care providers (e.g., hospitals, physicians, nursing homes, home health visits) and charged to patients as part of the provider bill. This nonretail segment is included in the CMS forecast of NHE but counted as spending on the provider administering the drugs. Thus, it is not directly visible as spending on prescription drugs.

In this study, Altarum makes use of data from QuintilesIMS Institute (IMS) to augment the CMS projections to include the share of health spending represented by the nonretail segment of prescription drugs. The study was originally published in October 2014. In August 2015, we added an addendum that reflected estimates incorporating the most recently available CMS forecast and IMS data. In May 2017, we add a second addendum that makes use of the CMS forecast released in March 2017 and data from the QuintilesIMS “Medicines Use and Spending in the U.S.” published in April 2017. The estimated nonretail prescription drug share of national health spending grows from 4.2% in 2015 to 4.6% in 2025. The CMS forecast estimates that over half of this nonretail prescription drug spending would be counted as spending on physician and clinical services. Another large share (about 30%) would be counted as hospital spending.