Chapter 10 Pharmaseuctical Access -- Reading Notes: Week 6
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: Americans complain that pharmaceuticals are too expensive and limit their access to beneficial health care services Drug expenditures have grown in part because they have become a more integral part of modern medical care Medical use is ubiquitous in all medical settings Drugs are often a substitute for other health care inputs . such as hospital stays and physician visits For both of these drug classes, pharmaceutical expenditures increased after their introduction o while at the same time total medical costs due to these illnesses declined Drugs can be both substitutes and complements to other health care inputs Newer products are often more expensive than the older ones, so that expenditures may rise due to displacement o even though prices of all drugs, new and old, and the number of prescriptions remains constant
Page 271 The Problem of Drug Expenditures Page 272
Whereas the share of health care expenditures allocated to pharmaceuticals has risen in recent years
: Price increases remain a minor cause of higher pharmaceutical expenditures
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: Statistics show that the rate of price increase for pharmaceuticals has exceeded that of the overall CPI for the entire period It is important to note that the rate of change of drugs has almost always been below that of hospital prices during the period for which data are available Utilization of pharmaceuticals has risen sharply, in part because of the country's aging population Finally, direct-to-consumer (DTC) advertising may also lead to increased consumption The increased quantity of filled prescriptions is the primary factor behind recent increases in pharmaceutical spending
existing drugs
THEREFORE, HIGHER SPENDING IS MOSTLY DUE TO GREATER PURCHASES OF BOTH NEW AND EXISTING DRUGS Another reason for price concern is the fundamental difference between pharmaceuticals and other health service components : though most health care purchases are exclusively services 0 pharmaceuticals have both services and manufacture product components service aspect is due to knowledge of the therapeutic properties of the compound the drug itself is evidently a manufactured product
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: Production costs of drugs constitutes less than half of total costs : pharmaceutical companies sell the same or similar drugs at different prices through discounts to health insurers, health plans or foreign countries Another reason for price concern is that most insurance plans cover well under 100% of the total charges for drugs The rate is low by historical standards, but it is still higher than the out-of-pocket
expenditures The higher share of pharmaceutical expenditures paid directly means that consumers are less sheltered from drug costs than for other health care services o making the costs more visible to consumers
coverage of outpatient drugs (Part D) did not begin until 2006 For the elderly that is not covered by Part D, the "cost" of a drug consists of co- insurance and deductibles These payments are generally linked to the type of drug used to fill a prescription and n