The Prescription Drug Share of National Health Expenditures

Research Brief | June 17, 2014

Each year, the Centers for Medicare & Medicaid Services (CMS) updates their historical and projected estimates of national health expenditures (NHE), including spending on prescription drugs.

CMS defines prescription drug spending to include “‘retail’ sales of human-use dosage-form drugs, biological drugs, and diagnostic products that are available only by a prescription.”

The 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 9.0% starting in 2013.

A more complete picture of spending on pharmaceuticals would 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. Drug spending for this nonretail segment is not separated out in the CMS health accounts.

The objective of this study is to estimate the size of this non-retail segment and how it has trended in recent years.

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