NCPA - National Center for Policy Analysis


July 8, 2004

Politicians and activists who decry the high prices of prescription drugs often mention pharmaceuticals' cost, but never their true value, says Kerri Houston, vice president of policy for Frontiers of Freedom.

Not only are prescription prices increasing slower than overall medical costs, she says, but prescription drugs often save money by offering alternatives to costly hospital stays and procedures:

  • Drugs only account for 10 cents out of every health care dollar, and drug prices have been increasing by about 4 percent annually, below overall medical inflation.
  • One study showed that patients on new congestive heart failure drugs avoided almost $9,000 in hospital costs over a three-year period, with potential nationwide savings of nearly $2 billion a year.
  • Some $1.1 billion is spent on diabetic amputations every year, many of which are preventable through medication therapy.

Spending only 7 percent of health care dollars on drugs instead of 10 percent may seem like a good idea, but this false savings leads to higher system costs and patients staying sick or getting sicker, says Houston.

Some patients do have legitimate affordability problems, but the answer is a combination of the new prescription drug discount cards, individual-based insurance plans, vigorous market competition of drugs, and targeted government subsidies for the truly needy, she says.

Source: Kerri Houston, "How Much Is A Pill Worth?" Investors Business Daily, July 7, 2004.


Browse more articles on Health Issues