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Health Affairs, Vol 19, Issue 2, 78-91
Copyright © 2000 by Project HOPE

Journal Article

Just what the HMO ordered: the paradox of increasing drug costs

Drug companies argue that newer, more expensive drugs offset other medical costs; health plans counter that they increase pharmacy costs more than they offer a "pharmacoeconomic" benefit. Neither side is universally right or wrong, and neither has the data to support its case. Increasing drug costs for selective therapeutic classes represent the fulfillment of managed care's original promise. Certain therapeutic classes of drugs offer pharmacoeconomic benefit, while others represent induced costs in excess of this benefit. Health maintenance organizations (HMOs) should determine one from the other and incorporate these findings into their plan designs; multitier drug coverage is the best method to achieve this.

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