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.

U.S. states with the highest total prescription drug charges

Fig. 1 Data is from Definitive Healthcare’s ClaimsRx product. Data represents physician drug market analytics aggregated by state. Prescription volumes and total charges represent claims for the calendar year 2021 through the end of October. Claims are sourced from multiple medical claims clearinghouses in the United States and updated monthly. Accessed January 5, 2022.

Which U.S. state has the highest total prescription spending?

Texas tops the list with the highest total prescription charges. This is the amount charged to insurance companies for the 107 million prescriptions filled for 5,593 different drugs.

California and New York have the second and third highest total prescription charges. These three states— Texas, California and New York—are among the largest states by population size.

Population size has a substantial impact on total prescription charges. With a large patient population, providers need to write more prescriptions. This means that healthcare providers in large, populous states are more likely to have higher pharmaceutical charges than healthcare providers in smaller states.

It’s also worth noting that Texas, California and New York are home to some of the nation’s top hospitals, according to U.S. News & World Report. Many of these top hospitals are academic medical centers or specialized cancer research centers, which are more likely to administer costly, experimental drugs to their patients. Drugs of this kind certainly drive up total prescription charges.

U.S. states with the lowest total prescription drug charges

Fig. 2 Data is from Definitive Healthcare’s ClaimsRx product. Data represents physician drug market analytics aggregated by state. Prescription volumes and total charges represent claims for the calendar year 2021 through the end of October. Claims are sourced from multiple medical claims clearinghouses in the United States and updated monthly. Accessed January 5, 2022.

Which U.S. state has the lowest total prescription drug spending?

Vermont is the state that spends the least on prescription drugs. In 2021, Vermont reported just over $212 million in total charges for 1.1 million prescriptions filled for 2,567 different drugs.

Population size is likely a substantial contributing factor in the state’s low prescription charges as Vermont is the second least populous state with just 643,077 residents.

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