Study: High Prescription Drug Costs Help Lower Other Medical Costs

While more than $216 billion is spent on prescription drugs every year, the upside to this high tab is that prescription drugs have contributed to decreases in more expensive hospital care and physician services.

As prescription drug costs, representing 10.3 percent of U.S. health expenditures, were rising, hospital expenditure and other medical costs showed a marked decline, says a study by Mark Farrah Associates (MFA), published in AHIP HI-WIRE Connection.

According to the study, physician and clinical service increases also fell when prescription drug costs peaked.

National health care expenditures have continued to rise. However, unlike the decades prior to 1990, when health expenditure annual increases were normally in the double digit range, annual increases have been in the single digits since 1991.

Prescription drug increases, on the other hand, started climbing at double digit rates in the 1980s, rising to a peak of 18.1 percent in 1999 and then declined through 2005.

When comparing percentage increases from 1961 to 2006 for prescription drugs and national health expenditures there is a negative correlation, implying that rising drug costs helped bring down more expensive costs of hospitalizations and physician services, the study says.

Sources:
Mark Farrah Associates (MFA)
www.markfarrah.com

America’s Health Insurance Plans (AHIP)
www.ahip.org