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What's Driving Healthcare Spending? It's the Drugs, New Data Show

Mary K. Caffrey
Prescription drug spending rose faster than overall spending by several percentage points from August 2014 to August 2015, well ahead of categories like spending on hospitals and doctors.
Spending on prescription drugs is propelling overall healthcare spending, according to the most recently monthly briefing from the Altarum Institute for August 2015.

Overall, health spending was up 5.7% in August 2015 from August 2014. While spending increased across all major categories, the biggest increase was in spending on prescription drugs, which rose 9.2% in the same year. This was down from its multi-year high of 14.6% in December 2014; that year-over-year jump reflected both the start of coverage for millions of Americans under the Affordable Care Act (ACA), and the arrival of the new class of hepatitis C drug at the end of December 2013.

By comparison, the gross domestic product for over 12 months for July (the last month available) was 3.2%.

This latest jump drew a response from John Rother, president of the National Coalition on Health Care and leader of the Campaign for Sustainable Rx Pricing:

"This latest health care spending growth report is more proof that astronomical prescription drug pricing continues to send health care spending higher and higher for consumers, public programs and our economy,” he said.

“As a result of the pharmaceutical industry’s shameless pricing strategies, prescription drug spending grew by a massive 9.2% in August 2015, outpacing every other major health category. This monthly report once again serves as a perfect example of a system that is truly out of control, reinforcing the need to find a sustainable solution before it’s too late."

Healthcare prices in August 2015 were 1.2% high than in August 2014, which the report said ended many months of 1.1% year-over-year increases. The sector continues to produce new jobs, adding 34,400 jobs in September. Hospitals hired 15,500 people in August, and have added 124,000 new jobs so far in 2015.

Prescription drug costs are the third-largest of the major categories of health spending, at $339 billion or 10% of overall spending. Only hospital spending (32%) and spending on doctors and clinicians (at 20%) are greater, but both these categories were fairly flat for the year-over-year measurement in August, despite the expansion of insurance coverage millions under the ACA.

Prescription drug costs also showed the highest growth over the previous 12 month period at 12.7%. Home health care rose the least at 1.2%.

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