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Increasing Drug Expenditures are Driven Primarily by Increased Utilization and Newer, Often Better Products—Not Higher Prices
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April 18, 2001
Background:
The ongoing debate over the trend of rising drug expenditures and the issues these increases raise for insurers, employers and senior citizens often is colored by the fact that many parties tend to emphasize price increases as the major factor driving the increase in drug expenditures. Several recent studies, including a study sponsored by the insurers, have concluded that price increases represent only a relatively small portion of the reasons total drug expenditures are increasing.
Key Points:
- At a recent Congressional hearing, Robert Dubois, lead author in the Health Affairs article, "Explaining Drug Spending Trends: Does Perception Match Reality?", stated that their study reveals that the driving force behind rising drug expenditures is the growth in use of drugs, not price increases. This increased utilization, according to Dubois, is a direct result of more patients receiving therapy, increased scientific knowledge, and better medical practice.
- According to this Health Affairs study, in both the managed care
and employer-sponsored health benefit plans, utilization, not price, was the
largest driver of drug spending for the seven pharmaceutical categories studied
antidepressants, antidiabetics, antihistamines, antiperlipidemics, asthma,
gastrointestinal, and hormone replacement therapy.
- Other drivers of increased utilization include an aging baby boom population, practice guidelines that dictate the use of more than one type of drug and the use of medications on a year-round. As this suggests, these factors are the result of demographic differences, as well as better quality healthcare.
- Increased drug expenditures are often accompanied by declining costs elsewhere; drug expenditures should not be viewed in isolation, but as a necessary part of high quality healthcare that can reduce hospitalization time and improve quality of life.
- As a result of their role in higher quality healthcare, prescription drugs can help employees be more productive, saving money in other parts of the economy.
Additional Information:
"Explaining Drug Spending Trends: Does Perception Match Reality?" Health Affairs, March/April 2000, Utilization 19, No. 2, pp. 231-239.
Contact:
The Biotechnology Industry Organization (BIO) represents more than 950 biotechnology companies, academic institutions, state biotechnology centers and related organizations in all 50 U.S. states and 33 other nations. BIO members are involved in the research and development of health care, agricultural, industrial and environmental biotechnology products.
BIO’s website has a variety of talking points on the potential for harm from price controls and also lists the hundreds of members the organization has—many of which are small companies dependent on venture capital streams that could be significantly harmed by price controls or even the threat of price controls. See www.BIO.org.
For other information and any questions, contact Sharon Cohen at 202-857-0244.
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