More MS news articles for January 2001

Drug Costs Go Up; Hospital Care Costs Go Down

Prescription Drugs May Be Substituting for More Costly Hospital Care Hospital Care Expenses Have Dropped Faster than Drug Spending Has Risen, Says Tufts Center for the Study of Drug Development

BOSTON--(BW HealthWire)--Jan. 16, 2001-- While public discussion in the United States in recent months has focused on rising drug prices, prescription medicines account for a relatively modest 8.5% of total U.S. health care expenses and may be substituting for more costly hospital care and physician services.

According to the Tufts Center for the Study of Drug Development, the U.S. today spends nearly three times as much on physician services as it does for prescription drugs, and over four times as much for hospital care. Although prescription drugs, as a share of total U.S. health care spending, increased from 5.5% a decade ago, hospital expenditures declined from nearly 37% to 33% during the same time, while spending on physician services remained nearly constant.

"Demand in the U.S. for drugs will increase significantly over the next several decades as an aging population demands more effective medicines to treat a greater variety of chronic diseases and lifestyle conditions," said Tufts Center Director Kenneth I. Kaitin. "Shifting expenditures from hospital care to prescription medicines is one way health care practitioners have responded to cost pressures, and that will likely continue."

Kaitin made his comments in connection with the Tufts Center's newly released Outlook 2001 Report on major expected pharmaceutical industry trends over the next 12 months.

According to the report:

Pharmacy benefit managers (PBMs) will provide more services to Medicaid and Medicare beneficiaries at the state and federal levels. PBMs will expand their services to include a much larger disease management component. Disease management will become an integral part of the Medicare program as more disease managers participate in the Medicare Coordinated Care Demonstration.

Policymakers will transfer more risk to PBMs and disease managers, leading to more integration of costs across health care budgets. U.S. states will increase their involvement in pharmacy assistance programs for the elderly and disabled, as well as with drug price reimbursement efforts, especially if prescription drug legislation remains stalled in Congress.

About the Tufts Center for the Study of Drug Development

Based in Boston, Mass., and affiliated with Tufts University, the Tufts Center for the Study of Drug Development ( provides strategic information to help drug developers, regulators, and policy makers improve the quality and efficiency of pharmaceutical development, review, and utilization. The Tufts Center conducts a wide range of in-depth analyses on pharmaceutical issues and hosts symposia, workshops, and public forums on related topics throughout the year