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Report: Medication Spending Expected to Increase 5% in 2014

Prescription drug sales totaled about $326 billion last year

Total spending on prescription medications has been declining for several years, but that trend is expected to reverse and rise 3% to 5% in 2014, according to a new report from the University of Illinois at Chicago’s Center for Pharmacoepidemiology and Pharmacoeconomic Research.

The report reviews recent changes in drug costs; identifies factors likely to influence future prescription expenditures; and projects drug spending for the current year.

The article will appear in the March 15 edition of the American Journal of Health-System Pharmacy.

“While prescription drugs are considered to be increasingly expensive, the overall rate of increase in drug expenditures has generally declined over the past 15 years,” said lead author Professor Glen Schumock.

For the first 9 months of 2013, he said, it was a record low 0.4%.

Several factors contributed to the decrease, Schumock said. The U.S. economic downturn, increased use of generics, and efforts to curb costs under the new health care reform law all played a role.

But costs may rise again this year, he said, because of increased access to pharmaceuticals with the expanded insurance coverage under the Patient Protection and Affordable Care Act (PPACA).

According to the Congressional Budget Office, 14 million previously uninsured Americans are expected to gain coverage in 2014 either through Medicaid expansion or the PPACA’s insurance exchanges. As a result, U.S. health care expenditures may increase up to 6.1%, reaching $3.09 trillion, or 18.3% of the gross domestic product.

Prescription drugs account for about 11% of overall U.S. health care expenditures, Schumock said. The 3% to 5% increase in overall drug expenditures that the report forecasts include a 5% to 7% rise in spending for clinic-administered drugs and a 1% to 3% increase in hospital drug expenditures.

Total prescription sales for the 12 months ended September 2013 were about $326 billion, 0.7% lower than sales during the previous 12 months, Schumock said.

Clinics and nonfederal hospitals saw increased drug spending (4.5% and 1.8% growth, respectively) in 2013 relative to 2012, Schumock noted. Federal facilities showed decreased expenditures (–13.7%), as did the long-term care (–4.2%), mail order (–1.9%), and retail pharmacy (–0.3%) sectors.

There is also a trend toward using drugs that are increasingly complex, which are more expensive than traditional phamaceuticals, Schumock said.

“This year a company [Gilead Sciences] announced that its new hepatitis C therapy will cost $1,000 per day, or $84,000 for a typical course of therapy,” he said. “A significant amount of effort will be needed to ensure that these drugs are used appropriately. This is a great opportunity for pharmacists who have knowledge in both the clinical and economic factors that need to be considered.”

Publication of the forecast is awaited each year by hospital and health-system pharmacists, who use it to help project drug spending and to develop budgets at their institutions, Schumock said.

Source: University of Illinois at Chicago; March 5, 2014.

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