Drug Spending Research Initiative

Prescription drug costs in the United States are increasing, with spending growth continually outpacing that of all other parts of the health care sector. Net spending on pharmaceuticals alone is expected to reach nearly $400 billion by 2020, up from $310 billion in 2015.   

Patients bear the burden of rising pharmaceutical costs in several ways, including higher insurance premiums and increased out-of-pocket costs, which can limit access to needed therapies. Taxpayers also shoulder the financial burden as spending increases in public programs such as Medicare and Medicaid.  

Multiple factors are driving these growing costs. Historically, U.S. health care has tended to adopt drug therapies when they provide additional clinical benefit compared to existing treatments, independent of the cost of the product. Today, a growing share of therapies entering the market are expensive pharmaceuticals designed to treat complex, chronic conditions, such as cancer and autoimmune diseases. These products, known as specialty drugs, currently make up 37 percent of drug costs but account for less than 2 percent of all prescriptions.

Existing pharmaceuticals are also contributing to rising drug spending, with manufacturers choosing to raise prices on many drugs year after year, including those with multiple therapeutic alternatives, such as treatments for multiple sclerosis and rheumatoid arthritis.

The Pew Charitable Trusts’ drug spending research initiative seeks to understand the underlying drivers of rising drug costs and identify policy options to better manage spending on these products in ways that help to ensure that patients have access to needed treatments.

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Erin Davis

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