25 states with the highest total prescription drug spending

According to a 2021 Gallup poll, an estimated 18 million Americans cannot pay for needed drugs. The average American spends over $1,300 on prescription drugs each year—more than any other country in the world.

Unfortunately, this prescription drug spending is expected to increase. The Centers for Medicare and Medicaid Services (CMS) projects that prescription drug spending will increase at an annual rate of 5.4% each year through 2028.

Why are prescription drug prices rising in the United States?

Specialty pharmaceuticals and oncology treatments have contributed in part to rising drug costs. Targeted, experimental drugs like these require a tremendous amount of research and testing to develop. Because of the resource-intensive development process, these drugs often come with a high price tag.

Additionally, drug utilization can contribute to rising drug prices. Both medication overutilization and medication nonadherence can drive up drug prices and overall healthcare costs. The delay in introducing generic drug options to market is another factor that causes higher prices.

Ultimately, the pharmaceutical supply chain largely dictates high drug prices. This supply chain contains three key players:

• Drug manufacturers
• Pharmacy benefit managers, and
• Payors

How are prescription drug prices determined?

Drug manufacturers price their treatments based on the product’s estimated value. There are few regulations to govern pharmaceutical pricing. This means that the manufacturer list price could be as high as $86,040 for a single treatment.

Lack of pricing regulation is one reason why common drugs like insulin increase each year. With a high market demand and few generic competitors, insulin manufacturers can continue raising prices.

The costs Americans actually pay for prescriptions depends on many factors, including:

• Their insurance plan
• The list of drugs covered by that plan
• The size of their deductible, and
• The discount that the insurance company received from the drug manufacturer

With so many variables at play, out-of-pocket drug costs can be highly unpredictable.

How can healthcare organizations use drug spending data?

Drug spending data can be helpful for certain healthcare organizations interested in the pharmaceutical market.

For instance, medical suppliers may use this data to target regions with high drug charges. This allows medical supply companies to identify new sales opportunities and sell lower-cost drug alternatives, if available.

Pharmaceutical companies may also use drug spending data when developing a new drug or therapy. This data helps drug manufacturers see how competitors are pricing their products and may help to inform the pricing strategy for a new drug.

Below we’ve compiled the 25 states with the highest and the lowest total pharmaceutical charges.