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The year is barely underway, but as you may read, prescription drug manufacturers raised prices on nearly 600 drugs in January, according to an analysis by 46brooklyn Research. Among the impacted medications are those used to treat diabetes, HIV, COVID-19, and cancer, as well as many other conditions. However, on the plus side for consumers, most of the price increases are below 10%. The median price increase is just 4.5%, according to Reuters.
Whether you should expect to pay more depends on your health plan. NPR research suggests that if a drug is not covered by insurance, and its price increases, the out-of-pocket cost for consumers will likely increase. If it has been covered in the past, you could see a copay increase or higher coinsurance in 2025. Whether your prescription is part of your health plan’s drug formulary is another consideration.
The impact of President Trump’s planned tariffs could also affect what you pay for drugs in 2025. More than 90% of generic drugs in the U.S. are imported – most of which come from China and India.
Whether you take a specialty medication is something else that could impact your wallet. According to Carelon, a subsidiary of Elevance formerly known as Anthem, while only five percent of the population requires treatment with a specialty medication, these drugs account for at least half of Rx spending in recent years.
50-Year Run-Up in Costs
In 1970, health care spending totaled $74.1 billion. Thirty years later, health expenditures had reached nearly $1.4 trillion. That figure more than tripled – to $4.9 trillion – in 2023. Of course, a part of that increase is attributable to the COVID-19 pandemic.
Average per person health care spending reached $14,570 in 2023, as compared to just $353 annually in 1970. In the past five years, spending on retail prescription drugs has grown faster than hospital and physician service spending, according to the Peterson-KFF Health System Tracker. In 2023, prescription drugs accounted for 9.2% of total health spending. In 2024, the Centers for Medicare and Medicaid Services (CMS) estimated prescription drug expenditures of around $460 billion – up 10-12% from 2023. That figure includes billions spent on diabetes and weight loss drugs.
IRA Brings Good Rx News
The Inflation Reduction Act (IRA) offers some positive news for Medicare beneficiaries in 2025. The IRA significantly impacts Medicare Part D out-of-pocket drug costs – capping costs at $2,000 and eliminating the so-called “donut hole” coverage gap. Once beneficiaries reach this amount, they do not have to pay further out-of-pocket costs for covered drugs during the remainder of the year. Once a
beneficiary reaches the $2,000 out-of-pocket cap, they enter the catastrophic coverage phase.
Also, a result of the IRA is new mandate that the U.S. Secretary of Health and Human Services (HHS) negotiate prices for certain drugs covered under Medicare Part D. The first 10 drugs are affected in 2026, and 15 more drugs are on the list for 2027. (Round 2 negotiations began in March and are expected to conclude by November 1, 2025.) After that, drug companies have 30 days to accept or submit a counteroffer.)
The 2027 drug list includes some leading semaglutide medications, Ozempic, Rybelsus, and Wegovy – all manufactured by Novo Nordisk – as well as Pfizer’s Ibrance and Bristol Myers Scuibb’s Pomalyst. A legal challenge to the IRA by the pharmaceutical industry has, so far, been unsuccessful. It is uncertain how future courts might rule, which could upset plans for both 2026 and 2027.
Rx Reauthorizations Reduced
Other good news concerning prescription drugs came in March, when Optum (the pharmacy benefit manager owned by UnitedHealth Group) announced it will soon eliminate up to 25% of prescription drug reauthorizations. The company’s initial focus will be on 80 drugs. Similar actions by other PBMs could follow.
Forecasting Prescription Drug Spending
No one knows for sure what lies ahead for the pharmaceutical industry, or for health care in general. However, with more breakthrough therapies already in development, and a continuing escalation in the share of pharmacy dollars going to specialty drugs, it seems reasonable to expect more Rx cost spikes.
Sources: Mercer Government & Vizient Inc.
| Drug Type | Spending | Amount | Projected Increase/Decrease |
| Specialty Drugs | Over half of total drug spend | High-cost medications | +4.44% |
| GLP-1 Drugs (Diabetes & Weight Loss) | Significant contributor | Not specified | Increasing |
| Gene Therapies | High-cost treatments | $2M+ per dose | Increasing |
| Oncology Drugs | Major driver | $250K+ per year per drug | Increasing |
| Medicaid Retail Prescription Drugs | National spending | Not specified | +6% annually (2023–2032) |
| Ambulatory Care Settings | Outpatient pharmacy spending | Not specified | Growing faster than inpatient |
| Biosimilars | Cost-saving potential | Not specified | Moderating costs |
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