Each year, the Centers for Medicare & Medicaid Services (CMS) updates their historical and projected estimates of national health expenditures (NHE), including retail spending on prescription drugs. The retail prescription drug share of NHE peaked at 10.4% in 2006 (the first year of Medicare Part D prescription drug coverage) and has since fallen to 9.4% in 2012. CMS projects this share to stabilize at 9% starting in 2013. A more complete picture of spending on pharmaceuticals would also include the nonretail segment. This segment includes drugs that are purchased by providers such as hospitals, physician offices, nursing homes, and home health agencies and billed to patients as part of the provider bill. Spending for this nonretail segment is not separated out in the CMS health accounts.
The Center for Sustainable Health Spending (CSHS) has just released a report that provides estimates of nonretail spending on prescription drugs. These estimates (see chart) provide a more complete picture of the prescription drug share of national health expenditures. The nonretail component adds roughly four percentage points to the share each year from 2008 through 2013. The overall share falls from 14.1% in 2008 to 12.6% in 2013.
Estimated Prescription Drug Share of NHE, Including Nonretail
Source: CSHS Data Brief
The shrinking nonretail drug share of NHE is somewhat surprising in view of the rapid reported growth in spending on specialty drugs and their relative importance in the nonretail segment. However, a closer look reveals that spending on specialty drugs has grown much more slowly in the nonretail segment than in the retail segment.
 Specialty drugs are defined as “being typically high-cost, scientifically engineered drugs used to treat complex chronic conditions that require special storage, handling, and administration, and involve a significant degree of patient education, monitoring, and management.” http://www.imshealth.com/imshealth/Global/Content/Corporate/Press%20Room/IMS_Health_in_the_News/PharmaVOICE_2_2014_SpecialtyDrugs.PDF