Increased Prescription Drug Spending Could Lead To Reductions in Other Health Costs, Study Says

Greater spending on prescription drugs may lead to decreased inpatient hospital and other health care costs, according to a new survey of disease-management organizations. The Boston Herald reports that the survey findings suggest that the U.S. health care system, including Medicare, could save money if drug consumption increases (Powell, Boston Herald, 3/13). Researchers at the Tufts Center for the Study of Drug Development surveyed 19 of the 25 leading disease management organizations in the United States, which represent 55% of the roughly 1.5 million people covered by disease-management programs. These programs help people with high-cost chronic conditions manage their illnesses and have become more popular as both insurers and state governments look to reduce health costs. The study's main findings include:

Forty-two percent of disease management programs said that increased spending on prescription drugs helps "contain" total health care costs, while 21% said that greater drug spending leads to increases in health costs, and 37% said that drug spending has "no effect" on total spending.
Seventy-five percent said that increased drug spending increases outpatient and physician costs but lowers inpatient costs (Cohen et al., Impact Report, March/April, 2002).

Discussing the latter finding, Tufts Center Director Kenneth Kaitin said, "Since prescription drugs account for less than 10% of total current U.S. health care spending, while inpatient care accounts for 32%, the increased use of appropriate pharmaceutical therapies may help moderate or even reduce growth in the costliest component of the U.S. health care system" (Tufts Center release, 3/13). Joshua Cohen, the author of the study, added that the federal government might actually save money in the long run by adding a prescription drug benefit to Medicare. "If you add a [benefit], it is going to cost money, especially in the first few years. But then you may see the kinds of savings that disease managers are talking about," Cohen said (Boston Globe, 3/13). This is part of the Morning Briefing, a summary of health policy coverage from major news organizations. Sign up for an email subscription.

Increased Prescription Drug Spending Could Lead To Reductions in Other Health Costs, Study Says

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