Understanding the Drivers of Drug Expenditure in the U.S.

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The increasing list prices of specific medicines has been widely reported in a series of media events over the past two years, drawing the attention of the public, healthcare stakeholders, and politicians. Much of the coverage has focused on list prices without the more complex context of the prices actually received by manufacturers or paid by intermediaries or patients, or the context of volume usage of the drugs in question, or of the longer term context of the changes in a drug’s price over time. The lifecycle of pharmaceuticals includes a period of patent protection where prices may rise but after which generic competition significantly reduces costs of the medicines, overall. This issue brief provides analysis around a key aspect of medicine spending growth trends.