• Elizabeth Schrier, David U Himmelstein, Adam Gaffney, Danny McCormick, and Steffie Woolhandler.
• Internal Medicine Residency Program, Department of Medicine, University of California, San Francisco, CA, USA. Elizabeth.schrier@ucsf.edu.
• J Gen Intern Med. 2024 Oct 24.

BackgroundDrug prices affect government budgets directly through spending on public programs like Medicare and Medicaid, and indirectly via private coverage for public employees and tax subsidies for private insurance. Yet, the Senate parliamentarian ruled that the Senate could not use streamlined Budget Reconciliation to extend the Inflation Reduction Act's controls on insulin co-payment or drug prices to private insurers on the grounds that their expenditures do not affect the federal budget.ObjectiveTo quantify insulin and other drug costs borne by federal, state, and local governments, including direct expenditures and indirect government subsidies that flow through private insurers.DesignCross-sectional analysis of expenditures for outpatient retail prescription drugs reported by respondents and their pharmacies in the 2019 Medical Expenditure Panel Survey (adjusted downward for drug rebates), supplemented with information on employment-related insurance from the US Office of Management and Budget and other sources.ParticipantsThe civilian non-institutionalized US population.Main MeasuresDirect (payments by public health insurance programs) and indirect (taxpayer-funded payments via private insurers) government expenditures for outpatient retail drugs.Key ResultsDirect government expenditures for outpatient retail prescription drugs totaled $154.85 billion in 2019, including $15.68 billion for insulin. Indirect government expenditures channeled through private insurers totaled $53.59 billion (including $5.48 billion for insulins). Those indirect expenditures encompassed $32.32 billion in tax subsidies for employer-sponsored private coverage, $25 million for subsidies to private Affordable Care Act marketplace plans, and $21.24 billion for government-paid premiums for public employees and retirees. Overall, government expenditures for outpatient retail prescription drugs totaled $208.44 billion, 58.76% of all-payer spending and 65.96% of spending for insulin.ConclusionsGovernments directly or indirectly fund most drug purchases, including substantial expenditures that flow through private insurers. Hence, prices paid by private insurers impact government budgets, supporting the view that government should be allowed to regulate drug prices.© 2024. The Author(s).

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