CFACT Seminar
Tom Selden, Salam Abdus, Eric Sarpong, and Ed Miller
Monday, April 27, 2015
10:30 a.m. – 12:00 p.m.
CFACT Rock Creek Conference Room
Rockville, MD
Slowing growth in U.S. health care spending has sparked considerable research interest. Was slower growth a temporary by-product of recession, or the result of more sustainable trends? Growth in prescription drug spending decelerated even more rapidly than spending overall, slowing from an average annual (nominal) rate of 15.6 percent between 1998 and 2002, to an average annual (nominal) rate of 1.5 percent between 2009 and 2013. In this paper we use data from the 1997–2012 Medical Expenditure Panel Survey to decompose the pattern of rapid and then much slower growth in prescription drug spending into changes associated with personal characteristics, such as age, race/ethnicity, income, health status and chronic conditions, and insurance coverage (in general and for prescription drugs), as well as changes associated with the pipeline of new blockbuster drugs, the flow of branded drugs losing exclusivity, and the sharp drop in generic prices in the latter half of the 2000s (sometimes referred to as “the Walmart effect”). We find that personal characteristics explain a large percentage of the overall change in average number of fills per capita, whereas factors surrounding drug approvals and exclusivity loss drive changes in average expenditure per fill.