HHS: Specialty drug costs up more than $300 billion since 2016

Key takeaways

• HHS released two reports that showed the U.S. health care system spent about $603 billion on prescription drugs in 2021.
• The cost of specialty drugs has continued to grow, increasing 43% since 2016 and representing 50% of total drug spending in 2021.
• HHS said the reports highlight the potential benefits of the Inflation Reduction Act. If the legislation had been in place from July 2021 to July 2022, at least 1,200 drugs may have been subjected to a provision that now requires manufacturers to pay Medicare rebates if they implement a price increase that is higher than drug inflation.

HHS has released two new reports that it said not only “illustrate the urgency of addressing skyrocketing prescription drug costs in America,” but also highlight the potential positive impact of the Inflation Reduction Act.

Specifically, the reports show how inflation rebates from the Inflation Reduction Act would protect Medicare beneficiaries from increasing drug costs, according to HHS. One report analyzed trends in prescription drug spending while the other tracked increases in prescription drug prices from 2016 to 2022. The reports were published by HHS’s Assistant Secretary for Planning and Evaluation (ASPE).

Trends in prescription drug spending

In the trends in drug spending report, Sonal Parasrampuria, a social science analyst and FDA portfolio lead at ASPE, and Stephen Murphy, an economist at ASPE, wrote that “Americans pay higher prices for prescription drugs than any other country in the world, with prescription drug prices in the U.S. more than 2.5 times as high as those in other similar high-income nations.”

The U.S. spent $603 billion on prescription drugs before accounting for rebates in 2021, with $421 billion coming from retail drugs, according to the report. the spending is largely “driven by a relatively small number of high-cost products,” the authors wrote.

Since 2016, specialty drug costs have increased 43%, totaling more than $300 billion, and accounted for half of total drug spending in 2021.

The report also showed that the top 10% of drugs by price accounted for 15% of retail spending and 20% to 25% of non-retail spending, despite comprising less than 1% of prescriptions.

Price increases for prescription drugs

In a second report on price increases, Arielle Bosworth, an economist at HHS, and colleagues noted that from 2016 to 2022, the list prices of several drugs increased by more than 500% — or more than $20,000.

From January to July, more than 1,200 products had price increases that exceeded the inflation rate, according to the authors. The inflation rate at that time was 8.5%, but the average price increase for those drugs was 31.6%. In that same timeframe, the average price list increase in July was $250 (7.8%) — up from January, in which the average list price increase was about $150 per drug (10%).

Inflation Reduction Act

HHS noted in a press release that spending growth was mostly because of increased spending per prescription, not a need for more prescriptions. However, Parasrampuria and Murphy said that provisions in the Inflation Reduction Act address drug pricing, which “may impact future drug spending trends.”

As of Oct. 1, the Inflation Reduction Act requires drug manufacturers to pay rebates for drugs in Medicare Part D whose cost increases exceed inflation for a 12-month period. A similar provision for Medicare Part B drugs will go into effect in January, according to HHS.

If the Inflation Reduction Act had been in place from July 2021 to July 2022, at least 1,200 drugs may have been subjected to the provision that requires manufacturers to pay Medicare rebates, according to the release. In the month the price change was implemented, price increases on those drugs averaged more than 30%.

“In recent years, prescription drug prices have skyrocketed, but thanks to the Inflation Reduction Act, America’s families will soon start seeing relief,” HHS Secretary Xavier Becerra said in the press release from HHS. “No one should have to choose between buying groceries or a prescription, making a home repair or going to the doctor, or splurging on a grandkid or seeking treatment.”

References:

• New HHS reports illustrate potential positive impact of Inflation Reduction Act on prescription drug prices. https://www.hhs.gov/about/news/2022/09/30/new-hhs-reports-illustrate-potential-positive-impact-inflation-reduction-act-prescription-drug-prices.html. Published Sept. 30, 2022. Accessed Oct. 3, 2022.
• Price increases for prescription drugs, 2016-2022. https://aspe.hhs.gov/reports/prescription-drug-price-increases. Published Sept. 30, 2022. Accessed Oct. 3, 2022.
• Trends in prescription drug spending, 2016-2021. https://aspe.hhs.gov/reports/trends-prescription-drug-spending. Published Sept. 30, 2022. Accessed Oct. 3, 2022.