Spending Trends for Medicines are at Historic Lows

Spending Trends for Medicines are at Historic Lows

03.16.11 | By

Yesterday, we wrote about GAO's report on drug prices - and similar research conducted by economists from MIT and IMS health. In both cases, the research took into account a mix of both brand-name and generic dugs when calculating drug prices - which reflects the way the market works.

Now, let's take a look at overall spending trends for prescription medicines. Government data tell us that the spending growth rate for medicines has declined considerably in recent years, reaching historic lows.

Here are the numbers: According to the most recent data from the Centers for Medicare and Medicaid Services Office of the Actuary (OACT), spending for prescription medicines grew 5.3 percent between 2008 and 2009. This is the fifth lowest growth rate in the 50 years since OACT began reporting data. Clearly, spending growth has been trending downward (down 8 of the last 10 years).

Looking ahead, IMS Health forecasts that market growth for prescription medicines will remain at "historically low" levels through 2013, at an average annual rate of 3.5 percent.

What's more, prescription medicines represent a small share of expenses in our health care system. In fact, medicines accounted for 13 percent of health spending growth between 2008 and 2009; 87 percent of spending growth was attributable to other services.

Most importantly, medicines provide tremendous value in advancing major health improvements - a theme that we will be revisiting in future posts.

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