Projecting future drug expenditures--2007

Abstract

Purpose: Drug expenditure trends in 2005 and 2006, projected drug expenditures for 2007, and factors likely to influence drug costs are discussed.

Summary: Various factors are likely to affect drug costs, including drug prices, drugs in development, and generic drugs. In 2005, there was a continued moderation of the increase in drug expenditures. Total prescription drug expenditures increased by 5.5% from 2004 to 2005, with total spending rising from $239 billion to $252 billion. Through the first nine months of 2006, hospital drug expenditures increased by only 3% compared with 2005. This moderation of the growth of prescription drug expenditures can be attributed to three major factors: availability of major prescription drugs in generic form, continued increase in cost sharing for employees in employer-sponsored health plans, and decreased use due to safety concerns. It is expected that expenditures in 2007 will be influenced by similar factors, with few costly new products reaching the market, increased concern over product safety reducing the use of older agents and slowing the diffusion of newer agents that do reach the market, and several important patent expirations, leading to slower growth in expenditures.

Conclusion: In 2007, we project a 5-7% increase in drug expenditures in outpatient settings, a 14-16% increase in clinics, and a 4-6% increase in hospitals.