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CBO: Pharmaceutical R&D and the Evolving Market for Drugs

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Pharmaceutical R&D and the Evolving Market for Drugs – October 26, 2009

  • “Investment in research and development (R&D) over the past several decades has produced a wealth of valuable new drug therapies that have made it possible to treat major illnesses that were not treated previously or were not treated as effectively. As the scope of available drug therapies expanded, spending on prescription drugs
    became the fastest-growing category of total spending on health care in the United States. Between 1994 and 2004, real (inflation-adjusted) spending on prescription drugs rose at an average annual rate of 11.1 percent, compared with 3.5 percent for hospital care and 4.3 percent for physicians’ services. More recently, however, that growth has slowed: From 2004 to 2007, drug expenditures grew
    by an average of just 3.2 percent per year, slightly less than the rate of growth in overall health care spending. As a fraction of total spending on health care, spending on prescription drugs rose from 6 percent in 1994 to around 11 percent in 2004, where it has remained.”
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