Prescription drug costs appear to have been increasing more rapidly than other health care costs in recent years, causing concern among health care purchasers and policymakers. While some policy responses have sought to restrain the prices charged by drug manufacturers, it is not clear how large a role price increases have played in recent cost growth. We attempt to evaluate the relative importance of changes in price, intensity and utilization factors in explaining the growth in prescription drug costs for a large privately insured population. Our data are prescription drug claims data for 1995-1999, for enrollees in insured groups contracting with a large pharmacy benefits manager (over 5 million covered lives). The data are summarized annually at the level of the molecular entity, and price indices are constructed to compare the cost of purchasing a basket of drugs at various points in time. Non-price factors are decomposed into intensity, utilization and drug-mix, using similar techniques. In addition, we compare the contribution of new and existing drugs over each time period. Price increases on existing drugs accounted for a relatively small proportion of drug cost increases for this population. A substantial portion of expenditure growth came from newly introduced drugs. For existing drugs, utilization increases were more important than price, due to increases in both the number of enrollees filling prescriptions and the number of prescriptions per user. The debate over drug costs needs to address the reasons for growing utilization, rather than focusing solely on price issues.
Learning Objectives: Participants will learn how to conceptualize total drug spending as a product of various components, in order to decompose spending growth into these components. Participants will also learn the relative importance of each component in spending growth for a particular insured population
Keywords: Prescription Drug Use Patterns, Cost Issues
Presenting author's disclosure statement:
Organization/institution whose products or services will be discussed: None
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.