Retail Prescription Drug Spending Growth May Slow Down in Next Decade

Retail prescription drug spending is expected to grow moderately throughout the next decade. But per capita out-of-pocket retail drug costs may decrease starting in 2024 due to the Inflation Reduction Act (IRA), a recent Peterson-KFF Health System Tracker study predicted.

Using National Health Expenditures Accounts historical and projection data from 2021, researchers found that per capita spending on retail prescription drugs has skyrocketed over the past three decades — from $101 in 1960 to $1,147 in 2021. Meanwhile, out-of-pocket prescription drug spending has been declining since the mid-2000s and is anticipated to drop by 8% by 2031.

In 2021, retail prescription drugs accounted for 21.6% of fully insured private health plan premiums and 8.9% of national health spending. Since the launch of Medicare Part D in 2006, Medicare has become the second largest payer for prescription retail drugs. Its share of national prescription drug spending has increased from 2% in 2005 to 32% in 2021, according to Peterson-KFF.

A report from HHS’s Office of the Assistant Secretary for Planning and Evaluation showed that the location where people get their retail prescription drugs also changed between 2016 and 2021. Americans increasingly received their drugs from mail order pharmacies (35% increase) and chain store pharmacies (4% increase).

The IRA, which allows Medicare to negotiate some prescription drugs’ prices and caps out-of-pocket spending for Medicare beneficiaries, may cause out-of-pocket drug spending to plateau in the coming decades. CMS estimates that out-of-pocket drug spending will peak in 2023 and then decline through 2027. By 2030, total out-of-pocket spending is projected to reach $48.1 billion, 18.5% lower than the $59.0 billion estimated before the passage of the IRA.

This infographic was reprinted from AIS Health’s biweekly publication Radar on Drug Benefits.

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