Pharmaceutical Business Revisited

The pharmaceutical industry in the U.S. will unlikely gain new friends among those that blame it for the country’s soaring healthcare costs, given the report in the journal Health Affairs released on September 18, 2007 that found that per capita spending on prescription drugs grew faster in 1998-2004 than in 1991-19981. This increased growth rate, blamed on expanded prescription drug coverage, reduced co-payments, a flood of best-seller drugs, and expanded Medicaid and state-sponsored medications coverage, occurred in all states (other than Colorado,) and the District of Columbia. According to the report, average annual per capita drug spending grew 12.5% between 1998 and 2004, in the country’s Far West up from 6.9% from 1991 to 1998, and per enrollee Medicaid drug-spending growth increased fastest in its Southeast, mostly in Tennessee.

Doubtless, the figures offer the chance for additional analysis, for examples, their correlations with differences among states in Medicare and Medicaid expenditures, and overall personal health care spending. Such analyses would clarify the contributions of ‘hidden’ systems’ failures, for example, to overall health spending at not just state but also at federal levels, and reveal novel outlooks on their trends beyond merely attributing increasing healthcare costs to prescription drugs for instance. For the U.S., and indeed, any country to ignore such analyses is to continue to grope for answers when in fact not having articulated clearly, if at all, the questions, a recipe for the perpetuation of the flaws that might be inherent in the system responsible for the soaring health spending to begin with. The tendency to blame increasing healthcare costs on prescriptions drugs is not unique to the U.S.

In Canada for example, health spending is increasing at a rate many consider hardly if at all sustainable2, and government spending on all prescription drugs, patented or not, is growing faster than any other constituent of health spending is 3. This is, for example, the reason for the conclusion among some that prescription drugs, particularly the patented ones, are primarily responsible for the country’s unsustainable healthcare costs4, but whether they really are is open to challenge, as was in a study published by the Vancouver-based Fraser Institute5 in February 2007. According to the authors, who analyzed the many potential ways that patented drugs might or might not contribute to healthcare costs, patented drugs particularly cannot, nor can pharmaceuticals in general be culpable for government health insurance not remaining sustainable financially5.

Their findings underscore the need for every health jurisdiction to conduct the appropriate analysis, for example, process cycle analysis, involving a decomposition/exposition of the elements of healthcare delivery that could, albeit, ‘surreptitiously’ contribute to healthcare costs, perhaps even significantly rather than base judgments, some which inevitably creep into policy formulations, on a cursory examination of available statistics. The authors of the Canadian study mentioned above for instance also noted that patented prescription medications in fact constitute a small proportion of government healthcare spending, overall expenditures on all medications, patented/non-patented, prescription/non-prescription, inclusive, were 17.4% of total health spending, government and private, in the country in 2005, prescription drugs, just 9.6% of government healthcare spending3.

They also noted that patented prescription medications in particular were only a projected 6.8% of annual government healthcare expenditures that same year, actually much less than in preceding years3, attenuating the potential impact on overall government healthcare spending growth rate of even fast growth rates in patented medications expenditures eventually5.

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