Tuesday, December 09, 2014

Hospitals and Physicians Outpace Drugs in New U.S. Healthcare Spending Data

Last week, the econowonks at the Centers for Medicare & Medicaid Services (CMS) released the 2013 National Health Expenditure data. Savor the numbers in this Health Affairs article: National Health Spending In 2013: Growth Slows, Remains In Step With The Overall Economy. (Free download)

It’s fashionable to blame healthcare spending growth on pharmaceuticals, but it’s also inaccurate. In 2013, prescription drug spending grew by 2.5%, which was 110 basis points behind the 3.6% growth in overall expenditures.

Our analysis also shows that spending on hospital care and physician services, which account for a majority of healthcare expenditures, grew more quickly than drug spending. See the chart below.

CMS projects that these trends will reverse in 2014, because of healthcare reform’s rollout and Sovaldi’s legendary launch. Until then, don’t blame drugs.


The CMS boffins publish annual calculations of U.S. National Health Expenditures (NHE), including prescription drugs sold through outpatient retail, mail, and specialty pharmacies. You can wallow in the full data set at CMS’s National Health Expenditure Historical Data page.

Expenditure (spending) data differ from those of pharmacy revenues, manufacturer sales, and provider purchases. NHE totals are net of manufacturer rebates, so the reported figures are lower than pharmacies’ prescription revenues and IMS Health "non-discounted" figures. The NHE data also do not measure total U.S. spending on prescription drugs, because these data exclude an indeterminate amount of inpatient spending on pharmaceuticals. Thus, U.S. drug spending in the NHE is roughly equivalent to total outpatient pharmacy revenues minus manufacturer rebates.

In CMS Forecast: Big Drug Spending Growth, But Hospitals and Doctors Will Still Capture Most Healthcare Spending, I reviewed the 2023 forecast, which was based on historical data through 2012.


In 2013, spending on outpatient prescription drugs accounted for only 9.3% of overall U.S. healthcare expenditures. However, expenditures on hospital care and physician services accounted for 52.2% of U.S. healthcare expenditures—more than five times as great as those on drug spending.

What’s more, drug spending grew more slowly than the other categories. See the chart below.

[Click to Enlarge]

In my next post, I’ll examine payer trends behind the 2013 prescription spending numbers.


  1. Adam,

    Ironically, ever since I have read studies depicting pharma's 'contribution' to the financial portion of the healthcare picture, I have always felt pharma does not know how to make its case to the American public. Instead, the industry allows itself to be put on the defensive. Make the case, emotionally, logically, and often. Sure there are issues concerning who 'pharma' is, the crafting of the messages, and many other unsettled matters stemming from the fact that there is no one amorphous body that speaks for pharma. Nonetheless, they need to find a path.

    Mitchell Goldberg
    MG Associates

  2. It is certainly good news that independent pharmacies are
    healthy, along with the entire industry. But I am confused about the vague
    reference alerting readers to "new special legislative protections" on
    their behalf. I certainly hope this is not in reference to independent
    pharmacies seeking to end barriers and closed doors to greater participation in
    the Part D program, which if anything has "special protections" for
    large pharma networks. Someone should please clarify they do not oppose open
    competition and consumer choice in this program, which would save U.S. seniors
    many millions of dollars for the medications they depend on.

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