Reinhardt Urges U.S. to ‘Relax’ About ‘Spiraling Spending’ On Prescription Drugs

While some have argued that "recent spiraling spending" on prescription drugs "threaten[s] to bring down" the U.S. health care system, they "should relax," Princeton economist Uwe Reinhardt said March 28, Reuters Health reports. "In the aggregate, spending on prescription drugs is not a major macroeconomic burden," Reinhardt said at a meeting of the Council on the Economic Impact of Health System Change. In 1999, he said, Americans spent a per capita average of $358 on prescription drugs, less per capita than on alcohol, tobacco and entertainment admission fees -- $413. "You could just as easily say football was the problem," Reinhardt added. He also called increased spending on pharmaceuticals an "overrated reason" for the recent "upsurge" in health insurance premiums. While prescription drugs "absorb" 15% of health insurance premiums, which have risen by about 20% per year, they have prompted only 3 percentage points of the increase, Reinhardt said. In addition, he said that reducing the pharmaceutical industry's profit margin would not "h[o]ld down" prescription drug spending, with industry profits representing only 1.2% of national health expenditures. "It is certainly fun to bash the profits of the drug companies, but in fact eliminating the profits are not going to help you a lot in bailing out national health spending," he said. However, Reinhardt cited the increase in third-party coverage of prescription drug costs and three-tier pricing systems that "shield" Americans from the actual costs of medications as a "major spur" to increased spending on pharmaceuticals. "People think all drugs have three prices: $8, $15 or $25," he said. He recommended that health plans require enrollees to pay for a percentage of their pharmaceutical costs, rather than a fixed co-payment, to "give people some idea of the actual cost of drugs." Health plans also could "hold down" costs by forcing enrollees to pay "anything higher than a pre-set 'reference price,'" he said (Reuters Health, 3/28).