Rx DRUG COSTS: Rising Costs Increase Burden
Employer-sponsored health plans are shouldering a greater burden of prescription drug costs today than five years ago, according to a new study of prescription drug records for 1 million patients by health benefits manager Merck-Medco. The study found that the average drug cost per patient for employer plans jumped from $237.97 in 1995 to $506.72. Researchers attribute much of the rise to the use of new patent-protected drugs instead of older, less expensive drugs. They expect the trend to continue for the next several years, driven by drug costs associated with heart failure, high cholesterol and hypertension. The pharmaceutical industry claims the rise in costs is necessary to offset high research expenses (Bloomberg News/Arizona Republic, 5/29). RxHealth Value, a coalition of health insurers, employers and labor unions, conducted another study from the patients' perspective which generated similar results. The group's sample included 1.4 million insured participants with a drug benefit included. It found that patient's costs for medications have more than doubled in the last three years. Among those with a prescription benefit, the cost continues to rise at about 25% a year. The study also found that the number of people on medication rose 3.5% per year, increasing greatest among people ages 45 to 65. Further, the number of prescriptions per person grew 14% each year (Los Angeles Times, 5/29).
Drug Price Debate
As drug prices rise faster than the inflation rate, insurers blame the increase for premium hikes and reductions in benefits. But noting that only one in five new therapies makes it through human clinical trials, the drug industry argues that "prices for the one in five therapies that do make it to market must compensate for the costs associated with those that don't." The dispute has sparked political debates in state legislatures and on Capital Hill, with many proposing price controls as a remedy. But William Comanor, a pharmaceutical economist at UCLA, argued that drug companies "are not going to spend the $300 million or so it takes to develop a drug if the government is telling them what to charge." Ronald Pollack, executive director of Families USA, disagrees. Admitting that price controls could result in some reduced revenues, he said: "[T]he drugmakers have far more latitude than they would have you believe." Pollack also points out that the pharmaceutical industry is the "most profitable industry in America." Since much of the "quantum leaps forward in our understanding of disease" begins with research funded by federal grants, the Los Angeles Times argues that it is the U.S. taxpayer who shoulders much of the financial risk. Much of pharmaceutical research is aimed at developing "copycat" products that can compete with their rivals' products and not basic research, Public Citizen's Frank Clemente adds (Marsa, 5/29).