NCPA - National Center for Policy Analysis

Developing Strategies To Contain Rising Drug Costs

September 11, 2002

Total spending on prescription medicines rose 16 percent in the U.S. last year to $142 billion -- 10 percent of the nation's $1.42 trillion worth of health-care spending.

This year, Medicare patients are expected to pay more than $1,000 out of their pockets for prescriptions -- up from $813 in 2000.

To cope, health-care providers -- including insurers, employers and governments -- are adopting a wide range of strategies to halt or even reverse the rapid escalation of prescription drug costs. For example:

  • Kaiser Permanente's Northern California Division has turned to lower-cost generic drugs as part of its cholesterol-management program, for example.
  • In Michigan, Blue Cross, the state's biggest health insurer, is actively pushing wider use of generics in ads, and has sponsored a state-wide contest among pharmacies to see which can dispense the largest proportion of generics when filling prescriptions.
  • Vermont and other states have taken controversial steps to force drug makers to compete on price -- including a "preferred drug list," largely of generics, for Medicaid patients, and a requirement that physicians adhere to the list, or get the state's permission before prescribing more expensive drugs.
  • AARP and other organizations are trying to counter prescription-drug ads with their own campaigns.

But all this activism carries the risk that restricting pharmaceutical companies' profits will discourage spending on research and result in fewer future medical advances.

Source: Ron Winslow, Laurie McGinley and Chris Adams, "States, Insurers Find Prescriptions for High Drug Costs," Wall Street Journal, September 11, 2002.

 

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