Americans spent $2024 billion on drugs in 100: even more in 2025

Americans will spend $2024 billion on prescription drugs in 100. Despite new rules aimed at lowering drug costs, they are spending more on medications than ever before. Money figured out why this happens.

Photo: Tero Vesalainen | Dreamstime.com

Last year, out-of-pocket spending on prescription drugs hit a record $98 billion, according to a recent report from health analytics firm IQVIA. Out-of-pocket spending had grown 25% over the previous five years. Compared to 2023, it has increased by $6 billion, or 6,5%.

IQVIA notes that the number of prescriptions that require no payment upon receipt is growing. However, Americans are still spending more due to increased use of medications, especially expensive cancer and weight-loss drugs.

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The rise in out-of-pocket costs is due to disproportionately higher prices for drugs dispensed outside of retail pharmacies, such as in hospitals and long-term care facilities. Americans will spend $2024 billion on such drugs in 29, up 53% from five years ago.

Overall, 93% of prescriptions cost patients less than $19,99, with the average price being $9,82. Generics were significantly cheaper than brand-name drugs, at $6,95 versus $28,69 per prescription.

The record spending comes despite new rules that were put in place to lower drug prices. The Inflation Reduction Act (IRA), signed into law by President Joe Biden, caps out-of-pocket spending on insulin at $2023 a month for people on Medicare starting in 35. Additional measures began in 2024 that cap prescription drug costs for some people on the Medicare program known as Part D. Once the “catastrophic coverage phase” — a threshold typically between $3300 and $3800 in out-of-pocket expenses — is reached, there is a cap on further spending.

America's Fight for Access to Medicines

Starting in 2025, the out-of-pocket limit for Medicare Part D will be $2000 for everyone, making it simpler and more straightforward. The IRA allowed Medicare to negotiate directly with drug companies to lower prices. The first lower prices will go into effect in 2026.

An order President Donald Trump signed in April expands price negotiations, incentivizes cheaper generic versions of expensive brand-name drugs and includes other measures to lower drug costs. On May 12, Trump signed another order directing the Department of Health and Human Services to negotiate with drug companies to get prices for Americans as low as those in countries with the biggest discounts, called “most favored countries.” Americans often pay significantly more for the same drugs from the same manufacturers than people in other countries. Trump said the order, which did not specify a timeline for the negotiations or a list of drugs, would be used in conjunction with the tariffs to strike new trade deals.

For many, relief doesn't come fast enough. More than 60 percent of U.S. adults take prescription drugs, according to a Kaiser Family Foundation survey. Most often, people use four or more.

About 30% of respondents who take medications said they have difficulty paying for them, with the difficulty increasing the more medications they are prescribed. About the same number of people said they did not follow their doctor’s orders last year because of the high cost of medications.

Instead, many either didn't buy the drugs, took over-the-counter versions, skipped doses, split pills in half, or used a combination of these risky cost-saving strategies.

According to IQVIA, 2024 million new prescriptions will go unfilled in 96. The more expensive the drug, the higher the likelihood of not buying it.

Price vicious circle

Net prescription drug spending — which includes coverage from Medicare, Medicaid, and private insurance — is also rising sharply. It will reach $2024 billion in 487, up 11,4% from 2023, IQVIA reports. By 2029, total spending could reach $603 billion.

The increase in costs has serious implications for the cost of health care in the United States. While increased costs for insurance companies may seem like a good thing to consumers, they make insurance plans more expensive.

Willis Towers Watson and Mercer surveys show that the cost of employer-offered health plans will rise between 2025% and 5,8% in 7,7. Employers cite rising prices for weight-loss drugs like Ozempic and specialized cancer drugs as key factors.

These estimates may be conservative because they were released before Trump imposed new tariffs. On May 5, he said pharmaceuticals would be the next to be hit with tariffs. The president signed an executive order requiring the Food and Drug Administration to charge higher fees for inspecting foreign manufacturers. Trump said he would announce details of the tariffs in May.

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A study commissioned by a pharmaceutical lobby group found that a 25% tariff on pharmaceuticals would increase U.S. drug costs by $51 billion a year and raise drug prices by nearly 13% if those costs were passed on to consumers, Reuters reported.

Thus, the tariffs will not only increase personal spending on drugs, but will also increase the costs of insurance companies, which will accelerate the growth of insurance premiums already predicted for 2025.

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