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. (See " What Is Behind the Recent Volatility in Retail Drug Spending? ," below.) At the same time, fewer brand-name drugs have lost patent protection than in previous years, which has meant lower savings from new 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 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 ). The most commonly cited data on prescription drug spending come from the National Health Expenditures (NHE) accounts compiled by CMS. The NHE accounts track annual spending by all payers for prescription drugs purchased in retail settings, such as pharmacies, mail-order outlets, grocery stores, warehouse clubs, and similar businesses. The NHE data do not include drugs dispensed in institutions including hospitals, long-term care facilities, and clinics, nor do they include over-the-counter products such as aspirin purchased without a prescription. According to the most recent NHE data, the United States spent $328.6 billion on prescription drugs in 2016 and a forecast $338.1 billion in 2017, or 10% of predicted 2017 national health care spending of $3.5 trillion. Prescription drug spending is forecast to rise to about 11% of national health care spending by 2027 (see Figure 1 ). Retail drug spending has ranged from about 5% to 10% of total health care expenditures since 1960, when the NHE accounts began compiling prescription spending data. (See " How Does 2016 Drug Spending Compare to Other Years? ") Because the NHE data provide information about retail drug sales only, a number of analysts say the data do not offer a complete picture of U.S. drug spending. The Department of Health and Human Services (HHS) in April 2016 issued a study that attempted to estimate total U.S. prescription drug spending—retail plus institutional use in hospitals and other health facilities. In addition to the NHE data, private consultants and academics publish their own forecasts of U.S. prescription drug spending. National estimates vary for a number of reasons, including assumptions about the dollar value of rebates that pharmaceutical manufacturers provide to health payers, as well as the value of coupons offered to consumers, and whether the forecasts include both retail and institutional use. However, the different studies show a trend toward higher spending in recent years. The pace of U.S. retail prescription drug spending has varied through the decades. For much of the 1980s through the early 2000s, retail drug spending grew at a double-digit annual pace. From 2003 through 2013, drug spending slowed to a historically low average annual growth rate of 5%. (See Figure 2 .) Drug spending growth moderated for a number of reasons, including a deep economic recession from 2007 to 2010, a reduction in the number of expensive new drugs coming to the market compared to earlier years, and a continued expansion in the use of lower-cost generic drugs. (See Table 1 .) However, in 2014, spending for retail prescription drugs accelerated. U.S. retail drug spending jumped by 12.4% in 2014—the largest annual increase in more than a decade. 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. (See " What Is Behind the Recent Volatility in Retail Drug Spending? ," below.) Retail drug spending is projected to grow by about 6.3% a year on average through 2027, according to the NHE, due partly to faster projected drug price growth, particularly for costlier specialty drugs. Although that growth rate would be a reduction from the recent pace, drugs would be expected to grow faster than other areas of health care spending. For example, the NHE accounts project that physician services and hospital care will grow 5% and 5.5% on average, respectively, over the same time period. During the 114 th and 115 th Congresses, a series of hearings have been held on prescription drugs in response to the acceleration in spending and sharp increases in prices for specific drugs. (See partial list of hearings in Appendix . The list focuses on hearings most relevant to drug pricing issues.) Retail prescription drug spending can be affected by (1) changes in the mix of available drugs, (2) changes in the price of drugs, and (3) changes in the volume of drugs used. 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 rate of prescription drug spending slowed in 2016, even though overall utilization rose during that year, due to factors that included fewer new drug approvals than in previous years, less use of high-cost hepatitis C drugs, and a deceleration in spending for drugs to treat diabetes. Drug mix refers to the cost of new drugs versus the cost of older drugs being used. New, innovator brand-name drugs often are more expensive than older drugs and do not have lower-cost equivalents. Likewise, newly introduced generic drugs, which are less expensive than brand-name products, can reduce the cost of certain therapies. During the past several years, the U.S. Food and Drug Administration (FDA) has approved a large number of novel new drugs, including expensive specialty drugs for treating hepatitis C, cancer, diabetes, and heart disease. In 2016 alone, more than half of the growth in U.S. prescription drug spending was from drugs that had been available for less than two years. 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. The impact of the hepatitis C drugs, while still large, is diminishing as fewer new patients are treated with the products and net prices drop for the drugs. At the same time that these expensive new drugs were coming to the market, new generic substitution was playing a smaller role in reducing total drug spending. Since 2009, patents for a number of best-selling brand-name drugs have expired, paving the way for manufacturers to produce new generic versions. In 2012, at the peak of the so-called patent cliff, spending for brand-name drugs subject to generic competition fell by $32.6 billion. However, annual savings from brands that have lost patent protection has been lower since then. Changes in drug mix will continue to play an important role in spending going forward. Many drugs now in the development pipeline are biologics, which often have a high introductory price and initially may not have many lower-cost alternatives. Although FDA has begun to approve biosimilar substitutes for biologics that have lost patent and marketing protection, so far these biosimilars are not significantly lower-priced than the original biologics. Prescription drug prices have risen faster than prices for overall U.S. goods and services since 2014 according to the Department of Labor's Consumer Price Index (CPI), which measures retail inflation. The gap between prescription drug and overall inflation narrowed significantly in 2017. (See Figure 3 .) U.S. retail drug inflation, as measured by the CPI-U, was 6.4% in 2014, compared to general consumer inflation of 0.8%. Drug prices rose 6.2% in 2016, compared to a 2.1% consumer inflation rate, and 2.8% in 2017, compared to consumer inflation of 2.1%. Drug inflation has been driven mainly by price increases for existing brand-name drugs and adoption of expensive new innovator brand-name drugs. (See " Changes in Drug Mix ," above.) Manufacturers also have raised prices for a number of existing generic drugs in the past several years. However, a 2016 HHS study found that generic price increases were not a major contributor to inflation. Likewise, pharmacy benefits manager (PBM) Express Scripts, in an analysis of prescription drug claims data, has found that the average price for commonly used brand-name drugs rose 10.7% from 2015 to 2016, and average prices for generic drugs declined by 8.7% over the same time period. Within the brand-name drug category, biologics and specialty drugs have driven much of the price inflation. During the past several years, the ACA expansion of prescription drug coverage has helped to boost demand for prescription drugs. Beginning in 2014, the ACA provided tax credits for the purchase of ACA exchange-based health plans and required many private insurance plans to cover prescription drugs as part of a package of essential health benefits.