Prescription drug costs expected to rise 20%

Americans go outside U.S. to buy cheaper drugs

The cost of prescription drug coverage is expected to continue to increase at a rate of nearly 20% in 2003, according to a report released in late November.

The "2003 Segal Health Plan Cost Trend Survey" reports projections for 2003 obtained from a survey of major insurance carriers, managed care organizations, pharmacy benefit managers, and third-party administrators. For people younger than age 65, retail prescription drug costs are projected to increase by 19.5%, and mail-order costs are projected to increase by 18.9%. For retirees older than 65, retail prescription drug costs are expected to increase by 19%, and mail order costs by 19.3%. If the actual 2003 costs match the projection, the cumulative effect of prescription drug trend increases since 1999 will have been an increase of almost 100% over five years.

Key factors driving the overall projected increases were price inflation and increased utilization in several major drug categories, such as antidepressants, antihistamines, antilipids, and gastrointestinal medication. Other factors contributing to the increase in prescription drug trends include:

  • increased patient demand and education as a result of direct-to-consumer advertising and other pharmaceutical marketing or promotional efforts;
  • increased prescribing in the antilipid and anti-ulcer drug categories;
  • efforts by drug manufacturers to increase market share and extend single-source brand use;
  • the introduction of improvements over existing therapies;
  • the introduction of new and expensive drug therapies and greater reliance on drug therapy by the physician community;
  • an aging work force;
  • increased obesity among all age groups;
  • improved techniques and technology to detect and diagnose diseases; and
  • the erosion of enrollee cost-sharing in plans with fixed copayments.

For more information about the report, see www.segalco.com/publications/surveysandstudies/2002trendsurvey.pdf.

Drugs outside U.S. attractive

A recent poll found that if drug costs continue to rise, many Americans (40%) would go outside the country — either in person, by mail, or through the Internet — to buy cheaper drugs. This percentage in the Wall Street Journal Online/Harris Interactive Health-Care Poll jumps to 51% among those who spend more than $2,000 per year on prescription drugs.

Five percent of Americans are making drug purchases outside of the country already, and 21% of those who have spent in excess of $2,000 per year on prescription drugs have shopped abroad to find better drug prices. This is a "catastrophe waiting to happen" for the drug industry because its profits depend heavily on the U.S. market, says Humphrey Taylor, chairman of The Harris Poll, Harris Interactive. "This trend is likely to grow as out-of-pocket costs rise because of increased co-pays, co-insurance, deductibles, and the growing use of tiered formularies."

Not many people (11%) are worried about the safety of drugs bought in Canada, the poll shows. "It would take a major scandal concerning the safety of drugs sold outside the U.S. to slow this trend, and many experts believe it would be extremely difficult to prevent people from buying drugs on-line from other countries," Taylor says.