	Introduction

Prescription drug affordability has gained renewed attention in the past few years, as retail drug spending has risen at the fastest pace in more than a decade. There are several reasons for the increase in drug spending. Manufacturers have been introducing new drugs at a record rate and raising prices for existing brand-name products. The Centers for Medicare & Medicaid Services (CMS) forecasts that retail drug spending could average 6.3% annual growth from 2017 to 2026. Although that growth rate would be a reduction from recent, more rapid levels, CMS expects retail drug spending to increase faster than other areas of medical spending in this 10-year period. This report will address frequently asked questions about government and private-sector policies that affect drug prices and availability. Among the prescription drug topics covered are federally funded research and development, regulation of direct-to-consumer advertising, legal restrictions on reimportation, and federal price negotiation. The report provides a broad overview of the issues and references to more in-depth CRS products. The appendix provides references to relevant congressional hearings (see Appendix ). Drug spending rose by 8.9% in 2015 before slowing to a 1.3% increase in 2016 and a forecasted 2.9% increase in 2017. The rapid increase in retail drug spending in 2014 and 2015 was driven largely by the introduction of new high-cost drugs, price increases for existing drugs, and the diminishing impact of generic substitution, as fewer brand-name drugs lost patent protection than in previous years. Implementation of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) also helped to propel drug demand. The introduction of new hepatitis C drugs, which can cure the disease, played a large role in increased drug spending in 2014 and 2015, accounting for nearly 40% of the net growth in total U.S. drug spending in 2014 and two-thirds of increased brand-name prescription drug spending by employer-sponsored health plans that year. Manufacturers also have raised prices for a number of existing generic drugs in the past several years. However, the number of consumers with high out-of-pocket costs—such as those with serious conditions or those prescribed specialty drugs—has increased. Congress and presidential administrations have expanded subsidized drug coverage to tens of millions of consumers during the past decade by implementing Medicare Part D and expanding eligibility for Medicaid as part of the ACA. Congress included a reworking of the MEDS Act provision in 2003 in the Medicare Modernization and Prescription Drug Act of 2003 (MMA; P.L. Some states have attempted to enact their own laws allowing prescription drug importation.
Prescription drugs play an important role in the U.S. health care system. Innovative, breakthrough drugs are providing cures for diseases such as hepatitis C and helping individuals with chronic conditions lead fuller lives. Studies show that prescription drug therapy can produce health care savings by reducing the number of hospitalizations and other costly medical procedures.
Congress and presidential administrations have attempted to ensure that Americans have access to pharmaceuticals by enacting the Medicare Part D prescription drug benefit as part of the Medicare Modernization and Prescription Drug Act of 2003 (MMA; P.L. 108-173) and expanding drug coverage under the 2010 Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended). Congress also has enacted laws to encourage manufacturing of lower-cost generic drugs, as well as cutting-edge biologics and biosimilars.
Americans are using more prescription drugs, and for longer periods of time, than in past decades. Still, access to prescription drugs remains an issue for a number of consumers, particularly those without insurance; those prescribed expensive specialty drugs for treating serious or rare diseases; or those enrolled in private insurance or public health plans with high cost-sharing requirements, such as drug deductibles and coinsurance.
Prescription drug affordability has gained renewed attention during the past few years as retail drug spending has risen at the fastest pace in more than a decade—growing 12.4% in 2014 and 8.9% in 2015 before slowing to a 1.3% increase in 2016. There are several reasons for the recent volatility in drug spending. Manufacturers have been introducing new drugs at a record rate and raising prices for many existing brand-name products. The introduction of new hepatitis C drugs at the end of 2013 had a major impact on total drug spending in 2014 and 2015. At the same time, fewer brand-name drugs have lost patent protection than in previous years, resulting in less impact from the use of lower-cost generic substitutes. The Centers for Medicare & Medicaid Services (CMS) forecasts that retail drug spending could average 6.3% annual growth from 2017 to 2026. Although that growth rate would be a reduction from the average level of the past several years, CMS expects retail drug spending to increase faster than other areas of medical spending in this 10-year period.
This report will address frequently asked questions about government and private-sector policies that affect drug prices and availability. Among the prescription drug topics covered are federally funded research and development, regulation of direct-to-consumer advertising, legal restrictions on reimportation, and federal price negotiation. The report provides a broad overview of the issues as well as references to more in-depth CRS products. The appendix provides references to relevant congressional hearings and documents (see Appendix).