Prescription Drug Costs Trend Update

At more than $100 billion, spending on prescription drugs represents over 20% of overall health care spending for Blue Cross and Blue Shield (BCBS) commercially insured members.¹ For that reason, analyzing prescription drug spending trends is critical to understanding overall health care costs.

Last year, Blue Cross Blue Shield Association (BCBSA), in collaboration with Blue Health Intelligence (BHI), explored baseline trends in the prescription drug market. The 2017 Health of America report, “Rising costs for patented drugs drive growth of pharmaceutical spending in the U.S.,” we examined the costs of branded and generic drugs and found a steady increase in overall drug spending between 2010 and 2016. This increase occurred despite the fact that inexpensive generic drugs dominated the market, representing 82% of total prescriptions filled in 2016.

One would expect the large market share of generic drugs to drive down overall prescription drug spending. But this is not the case. Why not?

To learn more about why generic drugs are not reining in prescription drug costs as anticipated this year, BCBSA and BHI performed a more in-depth review of two types of branded prescription drugs. Spending on these two types—branded patent-protected drugs and branded specialty drugs—has accelerated rapidly over the last eight years. In 2017, generic drugs maintained their large market share, rising to 83% of prescriptions filled, while overall drug spending increased by 2%. From 2016 to 2017, spending on both branded patent-protected drugs and branded specialty drugs rose even more rapidly, by 5% and 10%, respectively. These trends highlight the underlying cost drivers in the prescription drug market and foreshadow potential surges in overall drug costs in the near future.²

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ENDNOTES

1. In this report, total spending amounts were extrapolated to the entire 88 million BCBS commercially insured population in 2017 and are adjusted for membership growth in prior years.
2. While the findings in this report do not include the impact of drug rebates, BCBS recognizes that drug rebate programs impact overall drug spending. The impact will depend on the total dollars of drug rebates available, the annual growth rate of drug rebates and the ability of the drug rebate program to change market dynamics.