The Big Bad Drug Industry?

June 9, 2010 at 2:17 PM Leave a comment


A recent study by the Kaiser Family Foundation found that spending in the US for prescription drugs was $234.1 billion in 2008, nearly 6 times the $40.3 billion spent in 1990. Although prescription drug spending has been a relatively small proportion of national health care spending (10% in 2008, compared to 31% for hospitals and 21% for physician services), it has been one of the fastest growing components, until the early 2000’s growing at double-digit rates compared to single-digit rates for hospital and physician services.  

Since 2000, the rate of increase in drug spending has declined each year except for 2006, which was the year Medicare Part D was implemented. By 2008, the annual rate of increase in prescription spending was 3%, compared to 5% for hospital care and 5% for physician services. From 1998 to 2008, prescription drugs contributed 13% of the total growth in national health expenditures, compared to 30% for hospital care and 21% for physician and clinical services.  

 

Annual prescription spending growth slowed from 1999 (18%) to 2005 (6%).  The key reasons for this slowing of prescription drug spending are: 

  • Increased use of generic drugs
  • Increase in tiered copayment benefit plans
  • Changes in the types of drugs used
  • A decrease in the number of new drugs introduced.
This profile raises the question as to why the drug industry has been a major focus of the healthcare reform effort.  Sure, some drugs cost more than $100,000 per dose.  That is significant, even for people with insurance coverage, and not easily understood by many consumers and healthcare professionals.  But given the limited portion of healthcare costs due to drugs, the significant rate of introduction of generic drugs, the lack of a significant drug pipeline outside of oncology and other, select disease states, there seems to be limited room for better managing these costs.
 
Instead, the lack of a significant pipeline outside of oncology therapies should be a major concern.  Pharmaceuticals offer the potential to improve outcomes while offsetting hospital and other healthcare costs.  The United States should support research efforts into new therapies while encouraging appropriate choice of drug therapy and compliance with indicated therapy regimens.  Such concepts as the patient-centered medical home and value-based insurance design should make inroads.  Appropriate provider and patient education will encourage even better therapy choice and enhanced compliance.
 
  

 

Let’s focus our energies in areas where cost savings and improved outcomes can be gained as there is significant room for improvement in the United States.  Let’s not excessively beat up those who are seeking to improve healthcare outcomes in a cost-effective way.

 

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Entry filed under: Generic Drugs, Healthcare Economics, Healthcare Reform, Hospital Care, Patient Centered Medical Home. Tags: , , , , , , , .

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