# Drugs key In Medical Cost Surge, study says



## Mike NoLomotil (Jun 6, 2000)

November 14, 2000Rise in Health Care Costs Rests Largely on Drug PricesBy ROBERT PEARNew York Times ----------------------- WASHINGTON, Nov. 13 ï¿½ Prescription drugs accounted for 44 percent of the increase in health costs last year, researchers said today.In a report published in the journal Health Affairs, the researchers said overall health costs for services covered by private insurance rose by 6.6 percent last year, while drug spending increased by 18.4 percent. The study did not separately examine costs for people without insurance.Paul B. Ginsburg, an author of the report, said prescription drugs accounted for more of the 6.6 percent increase in health costs than either hospital care or doctors' services."Drug spending is growing much faster than other components of health care," said Mr. Ginsburg, an economist who is president of the Center for Studying Health System Change, a private research institute. "Drug costs are having a bigger and bigger effect on overall health costs."Inflation is back after several years of low growth in health insurance premiums, said Mr. Ginsburg, a former director of health care studies at the Congressional Budget Office. The higher premiums mean higher costs for employers and, in many cases, for employees, he said.Another author of the report, Jon R. Gabel, said the resurgence of health care costs was alarming."It appeared that health costs were under control from 1993 to 1997, and even into 1998," said Mr. Gabel, a vice president of the Health Research and Educational Trust, a nonprofit group affiliated with the American Hospital Association. Christopher Hogan, a health policy researcher, helped write the report.Judith H. Bello, executive vice president of Pharmaceutical Research and Manufacturers of America, said she had not read the study and could not comment. But she insisted, "Prescription drugs are often the most effective and least costly way" of treating an illness.The rise in prescription drug costs has stimulated interest in proposals to rein in drug prices or add drug benefits to Medicare, the federal health insurance program for the elderly and disabled.Representative Tom Allen, Democrat of Maine, has introduced a bill that he said would make prescription drugs available to Medicare beneficiaries at the prices negotiated by large government purchasers like the Department of Veterans Affairs. Mr. Allen and other Democrats complain that elderly people often must pay far more for prescription drugs than do the drug companies' most favored customers, like health maintenance organizations.But a federal appeals court last week upheld the right of pharmacies to charge higher prices for drugs sold to people who are uninsured.The decision, by the United States Court of Appeals for the 11th Circuit, in Atlanta, involved Rite Aid drugstores in Alabama. The court said that retail pharmacies had no duty to disclose whether they charged higher prices to uninsured consumers than to insured customers. It said such disparities did not constitute fraud and did not violate the law."Variable pricing is the norm in many industries," said the opinion, by Judge Charles R. Wilson. "Airlines frequently charge different groups of consumers different rates for the same seat, hotels often charge different rates to different consumers for the same room and car dealerships sell identical vehicles for a variety of prices, depending upon the identity (and savvy) of the consumer." The report in Health Affairs said that about one-third of the increase in drug spending last year was attributable to higher prices. The remainder, it said, was attributable to a higher volume of sales, reflecting the advent of new medicines and the increased use of existing drugs.While prescription drugs accounted for 44 percent of the increase in health costs last year, the report said, doctors' services accounted for 32 percent, and outpatient hospital care accounted for 21 percent, while inpatient hospital care was responsible for only 3 percent.Spending at hospital outpatient clinics grew "at a consistently high rate throughout the 1990's," the report said. By contrast, it said, per capita spending for inpatient services declined in 5 of the last 10 years."The period from 1994 to 1998 was a time of record-low rates of growth in health insurance premiums and in the underlying medical expenses that are covered," the article said. The premium for a typical private health insurance plan grew an average of 2 percent a year from 1994 to 1998 ï¿½ less than the increase in per capita gross domestic product, the output of goods and services, the authors said. Premiums this year rose an average of 8.3 percent for all businesses and 7.5 percent for companies with 200 or more workers.____________________________MNL____________________________ www.leapallergy.com


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