Confused about drug prices? Where have drug prices been going? What is the reality of prescription drug prices for the majority of medications? Here is a summary of a new CBO report. Take a look past the political rhetoric.
In recent years, policymakers have expressed concerns about the high prices of prescription drugs. Those drugs offer wide-ranging benefits, such as reducing the need for services provided by physicians and hospitals, improving the quality of life, and extending life. However, high prices reduce consumers’ access to such medications. They also contribute to higher spending that strains budgets, including the federal budget.
In this report, the Congressional Budget Office examines trends in nationwide spending on prescription drugs over the 1980–2018 period. The report also provides a more detailed analysis of trends in spending, use, and prices in the Medicare Part D and Medicaid programs over the 2009–2018 period.
Spending on Prescription Drugs. After decades of increases, per capita spending on prescription drugs began to level off in real terms (that is, with the effects of economywide inflation excluded) in the mid-2000s. Since that time, such spending has fallen as a percentage of total spending on health care services and supplies. That slower growth in spending is associated with the growing availability of generic drugs, which tend to have much lower prices than their brand-name counterparts. The period from 2013 to 2015 was an exception; during that time, spending on prescription drugs increased sharply, both in dollar terms and as a share of total spending on health care services and supplies. Although per enrollee spending in Medicare Part D was fairly stable from 2009 to 2018, per enrollee spending in Medicaid increased somewhat faster than nationwide per capita spending over that period.
Use of Prescription Drugs. Consumers’ use of prescription drugs has increased over time. Greater use of generic drugs is a key factor in that increase. Prices of Prescription Drugs. The average net price of a prescription—that is, the price of a prescription after subtracting the discounts and rebates that manufacturers provide to private insurers and federal programs—fell from $57 in 2009 to $50 in 2018 in the Medicare Part D program and from $63 to $48 in the Medicaid program. That trend reflects the increased use of lower-cost generic drugs, which was partially offset by rising prices for brand-name drugs.
The average net price of brand-name prescription drugs increased substantially over that period: from $149 to $353 in Medicare Part D and from $147 to $218 in Medicaid. Average prices for generic drugs in Medicare Part D and Medicaid fell over that period. Nationwide changes in average prices—overall and for both brand-name drugs and generic drugs—probably followed similar patterns.