Decomposing changes in the growth of U.S. prescription drug use and expenditures, 1999-2016

Abstract

Objective: To analyze factors associated with changes in prescription drug use and expenditures in the United States from 1999 to 2016, a period of rapid growth, deceleration, and resumed above-average growth.

Data sources/study setting: The Medical Expenditure Panel Survey (MEPS), containing household and pharmacy information on over five million prescription drug fills.

Study design: We use nonparametric decomposition to analyze drug use, average payment per fill, and per capita expenditure, tracking the contributions over time of socioeconomic characteristics, health status and treated conditions, insurance coverage, and market factors surrounding the patent cycle.

Data collection/extraction methods: Medical Expenditure Panel Survey data were combined with information on drug approval dates and patent status.

Principal findings: Per capita utilization increased by nearly half during 1999-2016, with changes in health status and treated conditions accounting for four-fifths of the increase. In contrast, per capita expenditures more than doubled, with individual characteristics only explaining one-third of the change. Other drivers of spending during this period include the changing pipeline of new drugs, drugs losing exclusivity, and changes in generic competition.

Conclusions: Long-term trends in treated conditions were the fundamental drivers of medication use, whereas factors involving the patent cycle accelerated and decelerated spending growth relative to trends in use.

Keywords: decomposition; expenditure growth; prescription drugs.