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What's Driving Health Care Spending? Hint: Not Drug Costs.

October 26, 2017
With health care costs an important concern for many Americans, a common misperception is the amount of U.S. health care dollars spent on prescription drugs. The truth? It’s not as much as you might think.

Prescription medicines including retail pharmacy sales and provider‑administered drugs, are only about 14% of overall health care spending. Hospitals, however, comprise by far the largest share, at about 30% of U.S. health care spending, or close to $1 trillion annually. Physicians and clinical services are another 20%.

To keep spending on treatments low and stable, drug manufacturers provide billions of dollars in rebates and discounts each year for their innovative therapies. These savings are the result of market-based negotiations among manufacturers, insurers and pharmacy benefit managers (PBMs).

But don’t just take our word for it. In a new mid-year spending report, Prime Therapeutics – a major PBM which serves 21 health insurance companies with more than 20 million members – shows how these rebates and discounts helped keep prescription drug spending in check for both government and commercial plans.

For a full picture of health care spending and the impact drug costs have on overall expenditures, click here.