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NATIONAL CENTER FOR POLICY ANALYSIS
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| High Drug Costs Reflect Increasing Demand |
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Increasing demand for prescription drugs drives up prices and overall costs, but that demand reflects the premium that Americans place on improved well-being, say analysts.
Consumers demand new drugs because they offer enormous benefits. New medicines save thousands of lives and reduce hospitalization rates but are also extremely expensive to develop:
- On average, each new drug approved during the period 1970-91 is estimated to have saved 11,200 life-years in 1991.
- One study figured that every $1 increase in pharmaceutical expenditures lowers hospital spending by $3.65.
- Drug companies spend nearly one-third of their capital on research and development costs.
- A drug company typically spends $802 million over the course of 10 to 15 years to develop a new drug, from the time research begins until Food and Drug Administration approval.
Among the changes that would improve drug access and affordability, analysts recommend:
- Changing the FDA approval process so that potentially life-saving drugs are tested and brought to the market faster.
- Lowering consumer costs by moving more drugs like antibiotics, contraceptives and allergy medications to over-the-counter status.
- Encouraging private charity by drug companies and foundations to offer discounted or free drugs to uninsured citizens here in the United States and impoverished patients abroad.
Source: Doug Bandow, "Demonizing Drugmakers: The Political Assault on the Pharmaceutical Industry," Policy Analysis No. 475, May 8, 2003, Cato Institute.
For text
http://www.cato.org/pubs/pas/pa-475es.html
For more on Economics of Drugs
http://www.ncpa.org/iss/hea/
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