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Retail prescription drug spending rose by 7.8% in 2021, as COVID-19 eased and patients got care they had been putting off, CMS says.

U.S. Retail Drug Spending Rose 7.8% in 2021, as COVID Eased and Patients Got Care They Postponed

Retail prescription drug spending in the U.S. shot up 7.8% to $378 billion in 2021, more than double the 3.7% spending growth rate in 2020, as the easing of the COVID-19 pandemic brought a surge in doctor visits and a resulting spike in prescribing, according to a study by the U.S. Centers for Medicare & Medicaid Services on 2021 healthcare spending published online Dec. 14 in Health Affairs.

“The trends in healthcare spending in 2020 and 2021 are inextricably linked to the many unique impacts of the COVID-19 pandemic,” said the authors of the study (subscription required), conducted by CMS’s National Health Expenditure Accounts Team.

As the pandemic began winding down last year, that sparked “strong growth in the use of health care goods and services as people sought care at a higher rate than in 2020,” they noted.

Another driver in the rise in prescription drug spending last year was an increase in the use of newly launched, brand-name drugs in 2021, while prescribing of newly available, cheaper generic drugs dipped to 16% of total prescription drug spending last year, compared with more than 20% in 2017. 

Among payers, Medicaid saw the fastest growth in spending on retail prescription drugs in 2021, with expenditures jumping 15.1% year-over-year, nearly double the 8.5% growth rate in 2020, the study showed, due to continued jumps in Medicaid enrollment and faster growth in utilization. Medicaid accounts for 10% of total retail prescription drug spending, CMS said.

Prescription drug spending by private insurance, the largest payer group at 40% of total spending, also rose dramatically last year, up 8.5% rise in 2021, compared with a 1.3% increase in 2020, the data showed. 

“Faster growth for both of these payers was in part attributable to increased use of retail prescription drugs, which resulted from people resuming the use of hospital and physician services that may have been delayed or forgone in 2020,” CMS said.

Medicare prescription drug spending, representing a 32% share of total spending, was mostly steady year-on-year, up 7.4% in 2021, from a 6.7% growth rate in 2020, CMS said.

Retail prescription drug spending accounts for 9% of total healthcare expenditures, according to the study.

Total healthcare spending rose by just 2.7% to $4.3 trillion last year, compared with 10.3% growth in 2020, the study showed. “The slower rate of growth in 2021 was driven by a 3.5% decline in federal government expenditures for healthcare after a spike in 2020 that occurred largely in response to the COVID-19 pandemic,” the study’s authors said.

Outlays for the COVID-related Provider Relief Fund, the Paycheck Protection Program, and other public health activity fed into a $0.41 trillion increase in federal healthcare spending in 2020, the authors noted. “However, in 2021 the healthcare spending trend reflected the impact of substantially reduced federal COVID-19 supplemental and public health expenditures (compared with 2020),” they said. For example, public health activity spending—which included funding for vaccine development and health facility preparedness—rose to $135.8 billion in 2020 from $13.3 billion in 2019, then plunged to $78.8 billion in 2021.

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