It is fairly common knowledge that prescription drug spending is high in the United States, largely because our drugs are more expensive than in other countries, but also because we have significant prescribing for conditions like anxiety and depression.

According to estimates, the United States spent $722.5 billion on pharmaceuticals in 2023, a 13.6% increase over 2022 and about $2,100 a person. Utilization was responsible for 6.5 percentage points of that increase, new drugs for 4.2 points and price for 2.9 points, but the price component is misleading, as new drugs have very high prices and heavy use of generics can appear to make prices decline. Most branded drugs continue to experience substantial annual price increases. The new weight-loss drugs account for much of the utilization and spending growth. Semaglutide, used to treat diabetes originally but now more prominent as a weight loss injection, was the top selling drug at $38.6 billion in sales. That drug manufacturer is very happy.

The traditional oral pill is not a significant part of our spending issue. Most of those medicines have expired patents and can be obtained in inexpensive generic form. Increasingly, new drugs are “specialty” medications, so-called because they require careful handling and are often administered as injections or infusions in doctors’ offices or other outpatient settings. Many of these drugs are used to treat cancer and a course of treatment can be priced at tens or hundreds of thousands of dollars and they now collectively account for half of all drug spending. The profits for the drug companies are immense, particularly on these specialty drugs. The actual cost of producing a drug might be 10% of the price. Drug companies spend most of their money on sales forces and marketing — we all see and hear the ads they constantly run.