US spending on prescription medicines will rise sharply to 10.7% in 2014, which is 5.1 percentage points - and $15.8 billion - more than it would have done without the passage of last year's Patient Protection and Affordable Care Act (PPACA), say new official forecasts.
And by 2020, prescription drug spending will account for 11% of US national health expenditures, compared to a level of 10% in 2013, according to the latest estimates published by economists and actuaries at the Centers for Medicare and Medicaid Services (CMS).
2014’s projected fast rise in prescription drug spending will be due to the fact that many of the people who will have health insurance for the first time as a result of the Act will be younger and healthier, on average, than the existing Medicaid and private-insurance populations. They will therefore likely use prescription drugs and physician services to greater extent than hospital or other more intensive services, say the report's authors.
US prescription drug spending grew 3.5% last year, down from 5.3% in 2009, and totaled $258.6 billion, according to the study, which is available on-line at the journal Health Affairs. This deceleration resulted from continued slow growth in the use of drugs and an ongoing change in the mix of products purchased, with health insurers continuing to shift medication use towards cheaper generics. As a result, the generic dispensing rate is estimated to have increased from 66% in 2009 to 69% last year, it says.
The authors forecast that prescription drug spending will grow by an annual average of 5.7% during 2011-13, as economic conditions improve. However, this faster growth will be offset somewhat by this year's patent expiries on six of the 50 top-selling brand-name drugs, and they expect this to hit growth particularly in 2012, as lower-priced generic versions of these products become available for a full 12 months.
From 2015 to 2020, US drug spending growth will average 7.2% a year, the report goes on. This will be partly due to the expected leveling-off of the dispensing rate for generics, resulting in slightly higher drug price growth, plus increased spending on new drugs resulting from the projected rise in Food and Drug Administration (FDA) approvals of New Molecular Entities (NMEs) and therapeutic biologics during the period.
The authors expect national health spending to grow an average 5.8% a year during 2010-2020, and that, during this period, the number of uninsured Americans to decline by nearly 30 million as a result of the PPACA, leading to prescription drugs and physician services accounting for a greater share of health spending than would otherwise have been the case.
Moreover, they project that health care spending by US government - local, state and federal – will increase from 44% of the national total in 2009 to 47% in 2014 and 49% by 2020. The government health bill in the latter year will total $2.3 trillion, of which nearly two-thirds will be paid for by the federal government.
In contrast, the private sector's share of health spending is set to fall from 20% in 2014 to 18% by 2020, the report suggests.