CMS Study Projects a Slowdown in Drug Spending Over Next Decade

While drug usage is expected to increase after the Medicare prescription drug benefit starts in 2006, drug spending will continue its slowdown over the next decade partly because of lower drug prices, according to a new Centers for Medicare & Medicaid Services (CMS) study.

Total prescription drug spending in 2006 is expected to grow by 11.6 percent, according to a CMS Office of the Actuary study that examined overall U.S. healthcare spending. Medicare drug spending under Part D of the drug benefit is expected to total $69.9 billion in 2006, said the study published in the online edition of Health Affairs.

"We forecast a minor rise in spending after Part D begins, because of an increase in prescription drug use by Medicare beneficiaries, with this impact largely offset by lower prices," the study authors wrote.

The forecast for drug spending in 2006 anticipates price discounts of 15 percent for Medicare Part D enrollees, according to the study, which also notes the Rx benefit will shift spending from the private sector to the government. Private prescription drug spending will account for 76.1 percent of all drug spending in 2005, a share that is set to fall to 59 percent in 2006, the study says.

Over the next decade, prescription drug spending growth is projected to decrease, falling to 8.7 percent by 2014, in part due to increased consumption of generic drugs and use of tiered copayments, the study says. Drug spending growth has fallen from a high of 14.9 percent between 2001 and 2002 to 10.7 percent between 2002 and 2003, the study notes.