Reconciling the Seemingly Irreconcilable: How Much Are We Spending on Drugs?


As health care stakeholders continue complex discussions on health care spending in the U.S., estimates of drug spending are often central to the public policy debate on how to manage that spending. Different sources cite prescription drug spending estimates as anywhere between 9.8% and 23.3% of overall health care spending. If stakeholders are unable to agree on a number, they are unable to even begin to agree on a policy.

In this study from the National Pharmaceutical Council and IQVIA, researchers developed a model to understand the underlying methodological inputs that drive the substantial variation in drug spending estimates. The authors examined the five commonly cited drug estimates from the National Health Expenditure data, Massachusetts Health Policy Commission, Kaiser Family Foundation, Blue Cross Blue Shield and America’s Health Insurance Plans. They developed a formula to standardize and evaluate three primary components of spending estimates: how the drug cost is measured, how the health care cost is measured and how the population is defined.

The analysis found that the wide variation in the estimates is driven primarily by methodologic differences. When the estimates were adjusted using a standardized approach for measuring and defining drug costs, total health care costs and populations, the range across the estimates was narrowed from 18.8 percentage points to 4 percentage points. The authors conclude that to support collaborative health spending policy discussions, stakeholders should mutually agree on a methodologic approach that matches the policy question at hand.