PHARMACEUTICALS: Rising Costs Strain Insurers
Drug costs might "outstrip hospital expenses as the second most expensive part of managed health care in a few years," the Boston Globe reports. According to leading health care officials, this "trend" would "force insurers to make extensive changes in the way millions of people receive pharmacy benefits." Last year, public and private insurers saw costs rise 16% nationally. "Pharmacy costs have gone through the ceiling," said Dr. Annette Hanson, medical director for the Massachusetts Medicaid program, who noted that "drug costs per patient shot up more than 46% between 1994 and 1997." By 2002, drug costs will "make up 22% of an average patient's total medical costs," according to Harvard Pilgrim Health, "while hospital expenses will be 20.8%." The Globe reports that one obstacle "is that drug use cannot be cut as easily as hospital stays. As a result, drugs represent a challenge that will require finer, more sophisticated tools to control."
Why The Rise?
Cost increases are due to several factors. "Pharmaceutical companies are producing a record number of medications, many of which are considered groundbreaking but carry high price tags," and at the same time the Food and Drug Administration "has been ushering more drugs to market by streamlining its approval process," resulting in a "steady stream of new, brand name drugs." "Ironically," some cost increase is due to managed care companies "who have pushed pharmaceuticals to avert illness and hospital admissions," the Globe reports. As a result of this strategy, fewer people are "admitted to hospitals thanks to drugs that prevent asthma and heart attacks." The Globe also notes that demographics "played a role." As Americans get older and managed care emerges as the "dominant form of health insurance," older patients drive up the "average cost of drug treatment" within HMOs. Today's patient is also better educated and "more demanding" when it comes to health care. According to Dr. Hanson, "The minute we hear about something new, we want it."
Aware of the growing number of educated consumers and physicians "susceptible to pharmaceutical ads," drug companies are spending an "estimated $1 billion on ads" up from "$600 million in 1996," according to Business & Health. Managed care companies are fighting back by launching "experiments" called "unadvertisements." In the early 1980s, Harvard professor Jerry Avorn used drug industry marketing tactics and "sent out pharmacists to visit 435 physicians in four states ... equipped with 'visually engaging' materials informing doctors about what drugs not to prescribe." The result of the tactic "was a significant decrease in prescriptions that were ineffective or had serious side effects." Tufts Health Plan has followed Avorn's tactic and "has hired four pharmacists to do 'counter-detailing.'" Health insurers are also "increasingly giving doctors financial incentives to curb unnecessary prescriptions. Some doctors, for example, are given a budget for drug expenses. Those who stay within their budgets receive financial rewards." Insurers are "also experimenting with computer programs that scan patient records and flag expensive drugs that could be substituted by less costly but equally effective treatment." However, insurers continue to be faced with the problem of "determining which expenses are warranted." According to Dr. Joseph Dorsey, medical director for Harvard Pilgrim HMO, "We can't let it continue to rise at this rate. We have to figure out ways to get our arms around this better" (Pham, 3/18).