Nov 17, 2018 - Health

We're not spending as much on drugs as you think

Data: Centers for Medicare & Medicaid Services; Chart: Kerrie Vila/Axios
Data: Centers for Medicare & Medicaid Services; Chart: Kerrie Vila/Axios

Prescription drugs are the political center of the health care debate, but we actually spend a lot more on hospital care and doctors’ visits.

By the numbers: In 2016, U.S. spent a little less than $330 billion on the kind of drugs you pick up at a pharmacy, according to federal data. That's about 10% of all health care spending.

  • Add in drugs that are administered by a doctor, and various estimates put the total closer to $450-475 billion, or 10-15% of health care spending.

But here's why drugs still get so much attention:

  • A few products can drive big spikes. Drug spending isn't growing too fast right now, but it leapt 12% in 2014 — because 2014 was the year high-priced hepatitis C treatments came onto the market.
  • The future is trending toward more expensive drugs. Highly complex “specialty” drugs (like those hepatitis treatments) make up less than 2% of all prescriptions, but are rapidly closing in on 50% of all spending.
  • Insurance deductibles keep getting bigger, which means people have to pay more of their own costs out of pocket. And while you may not have been to the hospital in a long time, millions of Americans use prescription drugs every day.

Even though we spend a lot more on hospitals and doctors, pharmaceutical companies keep a lot more of the money. In the third quarter of this year, drug companies accounted for just 23% of the industry’s revenue but controlled 63% of its profits.

Go deeper: Read the rest of Axios' Deep Dive on prescription drug prices

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