Three facts about health care spending

The facts matter when talking about health care spending. As policymakers continue discussions on ways to address high costs and abuse in the system, they need to take a look at all the stakeholders involved.

Sarah Sutton
Sarah RyanApril 25, 2023
Three facts about health care spending

Three facts about health care spending.

There is increasing talk about making changes to our health care system to lower costs for patients and address misaligned incentives. These are important conversations that could lead to meaningful improvements, but only if policymakers take a holistic approach to address all the health care drivers. Far too often, there is a singular focus on prescription medicines, ignoring the other parts of the supply chain that are key drivers of U.S. health care spending. Here are three key facts to help provide context to the conversation:

Spending on medicines is a small and stable share of total health care spending. 

  • Medicine spending overall is only 14% of health care spending and is expected to stay that way for the next 10 years.
  • The government’s inflation data show that overall medicine prices at the pharmacy counter grew less than 3% in the past year.
  • Further, when you look at the prices of brand medicines specifically, net prices (meaning prices after accounting for rebates, discounts and other payments) grew by only 1% in 2021, on average, below or in line with the rate of inflation for the fifth year in a row.
  • However, this trend doesn’t always lead to lower costs for patients. Take insulin, for example. Rebates, discounts, and other payments from manufacturers lower the cost of commonly-used insulins by 84% on average, but insurers often don’t share those savings with patients at the pharmacy counter. As a result, patients can end up paying more for insulin than their insurance company and pharmacy benefit manager (PBM).

Insurers and their PBMs are siphoning money out of the system and into their pockets while driving up costs for patients.

Hospitals continue to be the primary driver of health care spending.

The facts matter when talking about health care spending. As policymakers continue discussions on ways to address high costs and abuse in the system, they need to take a look at all the stakeholders involved.

Learn more at PhRMA.org/Cost

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