University of Michigan researchers reported on
July 13, 2001, that the primary reason for increases in pharmaceutical
spending of managed care plans' is the voracious appetite by consumers
for prescription medications, particularly new products.
The study demonstrates that largely as a result
of higher consumption of new and existing drugs, managed care plans
saw sharp increases in prescription costs over a two-year period -
up 34.8 percent for HMO's (health maintenance organizations) and 30.7
percent for PPO’s (preferred provider organizations). Also, almost
exclusively due to prescriptions for new drugs, traditional fee-for-service
plans experienced a 17.3 percent increase during the same period.
Dr. Michael Chernew, an associate professor of
health management and policy and lead author, said that greater employee
demand for prescription medications, as opposed to "simple price
increases in existing drugs," is driving much of the trend. He
said that this fact alone "makes the prices of newly introduced
products that much more important."
The study used 1996 to 1998 prescription cost
data from one unidentified national employer with 44,228 hourly and
75,433 salaried employees and reported its findings in the July issue
of the American Journal of Managed Care.
In an accompanying editorial, Dr. Bernard S. Bloom
of the University of Pennsylvania wrote that the findings debunk 'the
conventional wisdom' about the causes of increasing drug expenditures.
In the editorial, Dr. Bloom stated, "The authors
demonstrated clearly that recent increases of drug expenditures were
due overwhelmingly to expansion in volume and changing mix...of prescriptions
written and filled. Price increases accounted for minor effects."
The author added that future research should focus
on whether higher utilization is warranted for specific clinical areas
and patient populations since utilization, not price, accounted for
much of the cost growth.
Since the University of Michigan researchers did
not have data on 'case-mix' differences among the plans, they could
not say whether one type of health plan did a better job than another
in controlling drug expenditures. However, the researchers noted,
to explain the wide variation in spending growth, those differences
would have to be 'substantial.'
The scientists suggested that rising drug expenditures
may not be all bad. They wrote, "pharmaceutical spending may reduce
spending on other types of health care services and, more importantly,
may improve health outcomes."
References: "Demand fuels sharp rise in health
plan drug cost," Reuters Health, July 13, 2001.
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