Understanding the Drivers of Drug Expenditure in the U.S.

This report provides analysis around a key aspect of medicine spending growth trends: manufacturer net revenues. It draws on previously published analysis in our reports Medicines Use and Spending in the U.S.: A Review of 2016 and Outlook to 2021 (April 2017) and Outlook for Global Medicines Through 2021: Balancing Cost and Value (Dec 2017).

Recent reports of increases in drug list prices and overall spend on medicines have put the spotlight on the cost of medicines in the U.S. The increasing list prices of specific medicines has, in particular, generated significant media attention. These messages have amplified concerns of policy makers, insurers, pharmacy benefit managers and other healthcare stakeholders that drug prices are to blame for rising costs in the U.S. healthcare system. 

However, much of the coverage on list prices has left out the more complex context of the prices, including

  • prices actually received by manufacturers or paid by intermediaries or patients
  • the volume usage of the drugs in question
  • the longer term context of the changes in a drug’s prices over time—including periods of price drops after patent protection

In this report you will find an in-depth analysis of the trends in medicine spending growth and manufacturer net revenues suggesting a far more complex situation than one of prices set by manufacturers simply being too high or growing too fast.

In particular the report highlights the dynamics between prices and volume and introduces a novel way of combining market segments to consider the impact of patent expiry alongside other price related elements. The result is a clearer reflection of trends that affect the costs of medicines in the market. The report also notes that the trend of manufacturer revenues and patient costs are evolving in opposing directions, and that patient exposure to cost trends are not uniformly distributed across patients.

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