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Signs of higher drug spending (with a catch)

Source: Bureau of Economic Analysis; Chart: Axios Visuals 

Gross prescription drug spending appears to be on the rise. Preliminary data from the Bureau of Economic Analysis shows the amount spent on prescriptions in the first quarter of 2019 increased 7.1% year over year, the highest annualized growth rate since the fourth quarter of 2015.

Yes, but: The data points do not factor in the rebates and discounts that drug manufacturers pass along to industry middlemen. So that higher spending rate doesn't tell the full story, and real spending growth almost certainly is lower.

Details: The BEA will revise these numbers twice by June, but they still won't account for drug rebates.

  • Data from the Centers for Medicare & Medicaid Services, which accounts for rebates but takes longer to come out, remains the gold standard for tracking prescription drug spending.
  • CMS found spending growth for retail prescriptions was essentially flat in 2017 and estimates the final growth rate in 2018 will be 3.3%. CMS predicts net drug spending will rise by 4.6% in 2019.

The bottom line: "The rebate issue really makes a mess of these things," said Paul Hughes-Cromwick, a health economist at research firm Altarum. Until the federal government gets real-time rebate data from drugmakers or pharmacy benefit managers, he said, "we're all running around chasing our tails."