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Drug spending could double by 2004

MANAGED CARE June 2000. © MediMedia USA
News and Commentary

Drug spending could double by 2004

MANAGED CARE June 2000. ©2000 MediMedia USA

Advances in pharmaceutical technology are helping millions of Americans in ways never thought possible before, but development of new products is an expensive undertaking. A new study for the Blue Cross Blue Shield Association of America and the Health Insurance Association of America concludes that new drug development will help lead U.S. prescription drug expenditures to double by 2004, and that 40 percent of the increased spending on prescription drugs will be for those now in development. Some pipeline drugs will be breakthrough products — for conditions for which no effective treatment exists — while others will compete with current treatments.

The researchers predict annual prescription drug-expenditure increases of 15–18 percent, a steeper rise than the 10–13 percent annual rate projected by the Health Care Financing Administration. By 2004, the report concludes, annual prescription drug spending will be $212 billion; by HCFA's reckoning, that figure will be $168 billion.

Estimates of annual U.S. prescription drug expenditures, in billions

Researchers at the School of Pharmacy of the University of Maryland based their projections on price and utilization data published in American Druggist for all prescriptions filled between 1989 and 1998. The implication for health plans, they write, is that payers need to take a more comprehensive look at the cost and benefits of new drug therapies, compared to those of existing pharmaceutical and medical interventions.

SOURCES: BLUE CROSS BLUE SHIELD ASSOCIATION, WASHINGTON, AND HEALTH INSURANCE ASSOCIATION OF AMERICA, WASHINGTON, 2000; HEALTH CARE FINANCING ADMINISTRATION, WASHINGTON, 2000

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