Health Care Spending Slows For Third Straight Year

Consumers Help Drive Down Prescription Drug Spending, Says NCPA’s Goodman

DALLAS (January 9th, 2007) – A dramatic decrease in the growth of prescription drug spending helped slow overall health care spending in 2005 to its lowest rate since 1999, according an article from the Centers for Medicare and Medicaid Services published today in Health Affairs.  According to the National Center for Policy Analysis (NCPA), the findings aren’t surprising considering the recent trend of employers giving employees financial incentives to control drug spending, in many cases allowing them to manage their health dollars thru HSAs and HRAs. 

“The easiest place to cut waste in health care is spending on drugs,” said NCPA President John Goodman. “As consumer-directed health care grows, we can expect this trend will continue for several years.”

There are many reasons drug spending has slowed, including:

  • Most brand name prescription drugs have generic and/or therapeutic substitutes that are much less expensive;
  • People shopping online for drugs in a natural marketplace; and
  • Patients using smart buying techniques as bulk buying and pill splitting.

“On the supply side, the market is responding to empowered health care consumers,” said Goodman.  “Evidence of this can be found in the behavior of drug retailers.”  For example:

  • was one of the first companies to offer discounted prices online.
  • Today, there are several dozen such companies
  • Last year, Wal-Mart began offering a month’s supply of generic drugs for $4; Target and other competitors quickly followed suit.

“All of these innovations are in response to patient control of health care dollars,” said Goodman. “Wal-Mart never would have cut prices to $4 for Blue Cross.”