Slower Price Growth, Use of Generics Balance Higher Spending on Cancer, Autoimmune Drugs

Last week’s report on national healthcare expenditures in 2018 showed that increased spending on new oncology and autoimmune drugs was partially offset by a decline in price growth and the continued increase in the use of generic drugs.

The annual report, released by the Office of the Actuary at CMS, estimates that in 2018, healthcare spending grew at a rate of 4.6% to $3.6 trillion, or $11,172 per person, faster than 2017’s 4.2% but equal to the 2016 rate. In 2018, the share of the economy devoted to healthcare spending, as measured by the gross domestic product, declined to 17.7% from 17.9% in 2017.

The report, which said that total prescription drug spending increased 2.5% in 2018, to $335 billion, was published in Health Affairs. In 2017, prescription drug spending rose 1.4%.

The net cost of health insurance rose 13.2% following growth of 4.3% in 2017. The growth rate for total personal healthcare spending remained the same in 2017 and 2018, at 4.1%.

In 2018, faster growth in nonprice factors helped drive higher growth in total retail prescription drugs, although price growth slowed for both prescription drugs and generics. Prescription drug prices fell by 1%. In addition, greater use of generic drugs pressured prices, although the change in the generic dispensing rate was the smallest since 2000—an increase of 0.3 percentage points to 85.6%.

Prescription medications increased their share of spending by 2 percentage points, from 76.7% to 78.7%.

The number of prescriptions dispensed (based on 30 days’ supply) increased 2.7%, faster than 1.8% seen the year prior. Studies have shown that increasing the average days’ supply can lead to better adherence by patients.

Most prescription drug spending (96%) comes from the pockets of private health insurance (a 40% share), Medicare (32%), out-of-pocket (OOP) expenditures (14%), and Medicaid (10%). The 3 largest payers of prescription drugs all experienced accelerating growth in 2018, with private health insurance and OOP spending by consumers growing 0.8% and 0.6%, respectively, after declines in spending in 2017 of 0.4% and 2.2%, respectively.

Medicare prescription drug spending increased 5.9% in 2018, up from 4.8% growth the year prior.

In Medicaid, spending growth slowed from 2.7% in 2017 to 1.4% in 2018.

Reference

Hartman M, Martin AB, Benson J, Catlin A. National health care spending in 2018: growth driven by accelerations in Medicare and private insurance spending [published online December 5, 2019]. Health Aff (Millwood). doi: 10.1377/hlthaff.2019.01451.