Prescription Drugs: Trends in Usual and Customary Prices for Drugs Frequently Used by Medicare and Non-Medicare Health Insurance Enrollees

Prescription drug spending as a share of national health expenditures increased from 8.9 percent in 2000 to 10.1 percent in 2005--among the fastest growing segments of health care expenditures--and prescription drug prices outpaced inflation during the same period. Rising prescription drug prices can affect consumers, employers, and federal and state governments. Federal policymakers are particularly concerned about rising drug prices as the federal government has assumed greater financial responsibility for prescription drug expenditures with the introduction of a prescription drug benefit to Medicare enrollees in January 2006, known as Medicare Part D. Medicare enrollees are also responsible for a share of drug costs under the Medicare Part D program. As an update to our 2005 report, this report responds to the request from Congress for information on trends in retail prices--known as usual and customary prices--for prescription drugs frequently used by Medicare enrollees and non-Medicare health insurance enrollees. This report focuses on (1) usual and customary price trends from January 2004 through January 2007, and (2) usual and customary price trends from January 2000 through January 2007 for the subset of drugs that were included in both our 2005 report and the current report.