Healthy Skepticism Library item: 12488

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Publication type: news

Taylor L.
US Rx drug spending in 2006: fastest rise in six years
PharmaTimes 2008 Jan 15
http://www.pharmatimes.com/WorldNews/article.aspx?id=12626&src=EWorldNews

Full text:

Growth in US health care spending increased slightly in 2006, advancing by 6.7% compared to 6.5% in 2005 to reach $2.1 trillion or $7,026 per person, the lowest rate of rise since 1999. However, in 2006 the increase in national spending on prescription drugs accelerated for the first time in six years, from 5.8% in 2005 to 8.5% to total $216.7 billion for the year, the federal Centers for Medicare and Medicaid Services (CMS) has reported.

Approximately half of the growth in drug spending was the result of increased use of prescription products, and this was in turn partly due to the Medicare programme’s Part D prescription drug benefit, which was introduced in December 2005. Other drivers of higher spending included new indications for existing drugs and wider use of specialty medicines, especially biotechnology products.

However, in 2006, 63% of all US prescriptions were written for generic drugs, compared with 56% in 2005. Contributing to the higher figure were increase patent expiries, the lack of blockbusters, continued use of tiered co-payment structures, patent expiries and discount programmes on generics offered by retailers such as Wal-Mart.

Medicare (the US federal programme which provides care for those aged 65 and over, plus younger people with certain disabilities and people of all ages with end-stage renal disease) increased its share of total US prescription drug spending from 2% in 2005 to 18% in 2006, while that of Medicaid (the programme for certain low-income individuals and families) fell from 19% to 9%. These and other public programmes such as those run by the Department of Veterans Affairs, plus state plans, accounted for 34% of total US prescription drug spending, compared with 28% in 2005. Private funding for prescription drugs, including private health insurance and out-of-pocket spending, fell 1.3% year-on-year; as a result, the private share was down to 66% from 72% in 2005.

The introduction of the Medicare drug benefit also led to the 5.5% increase in private health insurance premiums in 2006, the smallest rate of rise since 1997, and a reduction in private insurers’ spending on prescription drugs for the year.

Nevertheless, health care spending continues to outpace the USA’s overall economic growth and general inflation, which rose 6.1% and 3.2%, respectively, in 2006, while the health spend accounted for 16% of US Gross Domestic Product (GDP), up 0.1% on 2005. “The cost of health care continues to be a real and pressing concern,” said CMS acting administrator Kerry Weem, although the agency also says the increase in spending was not due to higher prices. Despite the major changes brought about by the Medicare benefit, the overall cost of prescription drugs in the US “has changed very little,” commented CMS chief actuary Richard Foster, who added that spending on the Medicare drug benefit continues to be lower than initially estimated.

Medicare plans slammed over drug costs
Meantime, the day after the CMS published its figures, advocacy group Consumers Union (CU) claimed that 75% of Medicare drug plans are continuing to raise the cost of prescription drugs for seniors. CU says that, during December-January alone, it found an average increase of $369 for five commonly-used medicines, with about one in six plans increasing prices for these five drugs by over $500 during that time.
Using the Medicare.gov web site, CU tracked the costs of five prescriptions offered by private Part D plans in five states since the programme began, and says this revealed that most insurance companies have annually increased the costs of the drugs about two to three times the rate of inflation.

This finding “really torpedoes the insurance industry’s claim that they are getting the best deal for seniors,” said CU senior policy analyst Bill Vaughan. “These continual price hikes are Exhibit A for Congress to give renewed attention to negotiating drug prices on behalf of America’s taxpayers and seniors, and offering the option of a Medicare-run drug benefit,” he added.