Part D spending is projected to nearly double in a decade. Drug spend is the fastest-growing component of nearly every total cost of care arrangement.
The Medicare course established the trajectory. Part D spending is projected to “nearly double from 2025 ($181 billion) to 2035 ($346 billion), representing an average annual growth rate of 6.7%,” and 54.8 million Medicare beneficiaries were enrolled in Part D plans in 2025.
Why the growth is concentrated
Drug spending growth is not distributed evenly across prescriptions. It is concentrated in a small number of high-cost therapies, which has two consequences for anyone bearing risk.
A few patients drive the total. A population’s drug spend can be dominated by a handful of members on specialty therapies. The finance course covered why small numbers of high-cost claimants make a budget volatile, and drug spend is the clearest instance: one new member starting a high-cost therapy can move a small population’s total materially.
Prices are set outside the organization’s control. A provider organization can influence which drug is chosen among therapeutic alternatives, where it is administered, and whether the patient takes it. It cannot influence what a novel single-source therapy costs. The oncology models in the specialty course ran into exactly this.
What is actually manageable
That distinction is the useful one for anyone planning a drug strategy. Splitting spending into what an organization can and cannot influence prevents a great deal of wasted effort:
| Manageable | Not manageable by a provider organization |
|---|---|
| Choice among therapeutic alternatives | The list price of a single-source drug |
| Site of administration for infused drugs | Whether a new therapy enters the market |
| Biosimilar and generic substitution | Manufacturer rebate arrangements |
| Adherence, and therefore downstream medical cost | Patent life and exclusivity |
| Avoidable duplication and inappropriate prescribing | Federal and state pricing policy |
The adherence inversion
One feature of drug spend runs opposite to the rest of value-based care and is worth stating plainly. For most services, an organization at risk wants less utilization. For many chronic disease medications, it wants more, because a patient taking their medication has fewer admissions and complications than one who does not.
That means a drug spend strategy has two directions at once: reduce spending on therapeutically equivalent alternatives and inappropriate prescribing, while increasing spending on adherence for conditions where medication prevents expensive events.
Worth remembering: an organization that treats its pharmacy line as a cost to be minimized will get the second half of that backwards. Copay barriers and utilization management applied indiscriminately reduce pharmacy spend and can raise total cost of care by suppressing the medications that were preventing admissions. This is why drug spend cannot be managed by a pharmacy department working to a pharmacy budget. It has to be managed against total cost of care, which is precisely what the arrangements in the next module either enable or prevent.
Key takeaways
- Part D spending is projected to nearly double from $181 billion in 2025 to $346 billion in 2035.
- Growth is concentrated in high-cost therapies, making small populations volatile.
- Provider organizations can influence therapeutic choice, site, substitution, and adherence, not list prices.
- Adherence spending should often rise, which inverts the usual utilization logic.
Sources
Check your understanding
What is Part D spending projected to do between 2025 and 2035?
That growth rate outpaces most other categories of Medicare spending, which is why drug spend increasingly determines whether a total cost of care arrangement succeeds.