Bitter Pill: The Rising Prices of Prescription Drugs for Older Americans

Publication Date: June 2002

Publisher: Families USA

Author(s): Amanda McCloskey

Research Area: Health

Type: Report

Abstract:

Prescription drug expenditures are the fastest-growing component of health care spending. Since 1995, national spending on prescription drugs has grown by over 10 percent every year, more than double the rate of growth for spending on hospital care or physician and clinical services.1 Three trends have been driving this rapid, sustained growth: The number of prescriptions per person is increasing; newer, higher-cost prescriptions are replacing older, less costly medications; and the prices of prescription drugs are rising. The latter trend--rising prices--has become increasingly important. More than one-third of the increase in national prescription drug spending from 2000 to 2001 was directly attributable to increases in drug prices. Rising prices affect all purchasers of prescription drugs--employers, insurers, states (as purchasers of drugs for Medicaid beneficiaries and state employees), and consumers. In recent years, many of these purchasers have taken steps to contain their prescription drug expenses. These steps have included negotiating rebates or discounts from drug manufacturers, steering consumers away from higher-priced drugs, reducing drug coverage, and shifting more costs to consumers through higher copayments and deductibles. Individual consumers, by contrast, have little recourse. Those who have insurance covering prescription drugs face higher copayments and, possibly, limits on which (or how many) prescriptions will be covered. Individuals who have no coverage for prescription drugs, however, bear the brunt of these price increases. With no employer or insurer to negotiate better prices on their behalf, they are left to pay the full cost of their rising prescription drug costs out-of-pocket.