U.S. Spending On Prescription Drugs Will Rise To $400 Billion By 2020 — Americans Spent $115 Billion On Generic Drugs In 2015

U.S. spending on prescription medicines is expected to rise to $400 billion by 2020. Americans collectively spent more than $115 billion on generic drugs last year.

Specialty drugs and continually spiking prices have ensured spending on prescription drugs keeps rising. Though slightly less severe than the record-setting increase seen in 2014, spending on medicines grew by about 8.5 percent last year. Extrapolating the rise, citizens are expected to spend as much as $400 billion on prescription drugs, according to a recently released report.

The report, published Thursday by the data firm IMS Institute for Healthcare Informatics, shows the government, insurers, and patients collectively spent more than $300 billion in 2015. This is higher by about 2 percent as compared to 2014. Even if this pace is maintained, Americans could end up spending close to $400 billion by 2020.


Interestingly, researchers estimate the rate of spending may actually fall marginally, despite having risen by about 10 percent in the last three years. The reason for the spike was the expensive medicines that were needed by about 400,000 patients since 2010. These patients needed drugs that cure Hepatitis C infection in the liver. Priced at around $100,000, these medicines alone resulted in adding $31 billion in spending on drugs, reported U.S. News.

In the next five years, the spending may rise by about 4 to 7 percent, instead of 10 percent, owing to various concessions that have become the norm in the industry. If the rebates, discounts, and such other techniques aren’t extended to the end consumer, spending on prescription medicines could rise by about 46 percent, to as high as $640 billion, in 2020, reported the Huffington Post. Speaking about the report titled “Medicines Use and Spending in the US: A Review of 2015 and Outlook to 2020,” Murray Aitken, executive director of IMS Institute for Healthcare Informatics, said as follows.

“That reflects the new dynamics in the marketplace, where we have heightened competition in several major therapy areas, including diabetes, with manufacturers taking price concessions through rebates. It also reflects more aggressive tactics by pharmacy benefit managers and health insurers to restrict access to certain drugs unless manufacturers agree to hefty discounts.”

Spending surged last year after new, but expensive drugs hit the market and makers increased prices. However, the increase was partially offset by expirations of many drug patents that allowed manufacturers to flood the market with generics. Branded generic drugs are much cheaper than their patented counterparts.

Interestingly, the arrival of generic drugs has been quite beneficial to Americans. These medicines have collectively saved the country’s health system $1.68 trillion within the last ten years. The arrival of generic drugs aripiprazole, esomeprazole, and celecoxib has had a big impact on the average spending, indicated the report. Branded generic drugs account for roughly 40 percent of medicines bought in the U.S., whereas generic drugs account for 88 percent of prescriptions dispensed in the U.S., reported LiveMint.


The report revealed specialty drugs continue to drive up the spending, which has nearly doubled in the past five years. Moreover, pharmaceutical drugs have been actively investing in these expensive drugs instead of focusing on conventional medicines like pills. As compared to pills, the costly complex injected drugs have contributed to more than two-thirds of overall medicine spending growth from 2010 to 2015.

Troublingly, despite significant expansions in coverage under the Affordable Care Act, spearheaded by President Obama and his health care law, patients are increasingly burdened by the higher drug prices.


Though the prices of drugs will continue to rise by between 10 and 12 percent annually, the report predicts costs might be offset by concessions as drug makers will try to retain their markets and customers.

Escalating drug prices has been a strong point for debate among presidential candidates, some of whom have vowed to tackle the issue if elected. Meanwhile, there have been cases of profiteering by a few individuals by blatantly increasing prices of critical drugs.

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