Wasteful spending in the U.S. healthcare system is a widely acknowledged and seemingly intractable problem. The country is still recovering from a long economic downturn, and imperatives to reduce the increase in costs across all areas of the healthcare system are increasingly prominent in discussions about the distribution of limited dollars. Healthcare costs caused by improper and unnecessary use of medicines exceeded $200 billion in 2012, according to IMS Institute for Healthcare Informatics estimates. This amount is equal to 8% of the nation’s healthcare spending that year, and would be suffient to pay for the healthcare of more than 24 million currently uninsured citizens. These avoidable costs arise when patients fail to receive the right medications at the right time or in the right way, or receive them but fail to take them. This report examines avoidable costs in six “opportunity” areas involving different diseases and care situations: nonadherence, delayed evidence-based treatment practice, misuse of antibiotics, medication errors, suboptimal use of generics, and mismanaged polypharmacy.This study finds that even though avoidable costs are significant, encouraging progress is being made in addressing some of the challenges that drive wasteful spending in many parts of the healthcare system. Medication adherence among large populations of patients with three of the most prevalent chronic diseases – hypertension, hyperlipidemia and diabetes – has improved since 2009 by about 3%. The proportion of patients diagnosed with a cold or the flu – both viral infections that do not respond to antibiotics – who inappropriately received antibiotic prescriptions has fallen from 20% to 6% since 2007. And, for diseases where lower-cost generic medications are available, use of generics reached 95% in 2012. A large number of pilot programs and initiatives have, in recent years, advanced the understanding of the underlying causes of improper prescription and use of drugs, and have led to the development of new techniques and approaches to address the issue.