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Drug Cost Growth |
Pharmaceuticals: Medicare And Cost Growth
PROLOGUE: The pharmaceutical industry has long been the most profitable sector of the American economy. This remarkable record notwithstanding, the industry has not been a major focus of attention within Washington for the past several decades, particularly within those congressional committees that authorize the purchase of health care services by the billions for public programs. However, the success that pharmaceutical companies had achieved in flying below the congressional radar screen has begun to change for one overriding reason: Drug expenditures have been rising rapidly—indeed, more than three times the growth of overall health care spending in 1999. This trend, combined with Medicare’s lack of drug coverage, has greatly accelerated the interest of Congress and the executive branch both in the industry and in providing such a benefit to Medicare’s thirty-five million disabled and elderly beneficiaries.
The papers in this section seek to shed more light on the scope of drug coverage, utilization trends, and industry practices. In an analysis of the Medicare Current Beneficiary Survey, John Poisal and Lauren Murray of the Health Care Financing Administration document prescription drug coverage, use, and spending among beneficiaries. Access barriers to drug coverage are uncovered in an examination of sources and stability of coverage by Bruce Stuart and Becky Briesacher of the University of Maryland and Dennis Shea of Pennsylvania State University. The last two papers focus on market dynamics. The analysis by Ernst Berndt of the Massachusetts Institute of Technology documents that rapid growth in utilization of existing and new drugs, rather than higher prices, has been the primary driver of increased drug spending. And Richard Frank of Harvard University examines differential pricing patterns of brand-name prescription drugs. In April 2000, President Clinton urged the industry to level the drug pricing playing field because uninsured patients pay the highest prices of all for pharmaceutical products.
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