Prescription Drugs: Innovation, Spending, and Patient Access. December 7, 2016. Report to Congress
(2016; 147 pages)


Prescription drugs can effectively treat many acute and chronic diseases leading to improvements in quality of life, life expectancy, and overall population health. Policy makers must carefully balance the incentives for stimulating innovation of effective medicines and efforts to assure the affordability of those medicines. On one hand, development of new prescription drugs is expensive, uncertain, and slow; requiring the prospect of financial returns to encourage sponsors to continue investing in innovation. Certain new drugs approved by the Food and Drug Administration (FDA) are granted market exclusivity for a period of time to encourage investment. The FDA’s orphan drug program also provides incentives to help address this challenge for rare diseases and conditions. On the other hand, if their promise is to be realized, medicines must be affordable and their prices should reflect their value in terms of patient health outcomes.

During most of the time period analyzed in this report (2003-2014), growth in prescription drug spending was moderated by a number of patent expirations and the resulting increased availability and use of generic versions of top selling brand-name drugs. Nonetheless, growth in prescription drug spending has been rising more quickly than overall health care spending in the United States. In recent years, growth in prescription drug spending has accelerated considerably due to increases in the number of newly available costly drugs, including specialty drugs and biologics. In 2015, there were a higher than average numbers of novel drug approvals. In addition, spending was accelerated by price increases in existing drugs; a relatively low number of patent expirations; increasing insurance coverage; increasing utilization; and population growth and aging. Prescription drug expenditures are projected to continue rising during the coming decade, adding to the nation’s total health care bill and placing increasing fiscal pressures on commercial, federal, state, and family budgets. Accumulating evidence suggests that patients with high out-of-pocket costs are more likely to delay or forgo treatments for acute and chronic illnesses or not take treatments as prescribed, jeopardizing any potential benefits of treatment.

Examination of recent trends in prescription drug use and spending can inform efforts to simultaneously promote innovation, improve quality of care, and reduce costs, while maintaining patient access to life-saving therapies. This report describes overall spending for prescription drugs and recent trends in spending using data from literature reviews and separate quantitative analyses for Medicare Part B, Medicare Part D, Medicaid, and the Veterans Health Administration (VHA) programs. Analyses of the National Health Interview Survey (NHIS) data were also conducted to examine patient access to prescription drugs, satisfaction, and outcomes for each of the four programs.

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