Controlling Healthcare Costs
New medicines offer a solution to healthcare affordability
Access to Innovation
Medicines represent what for many is a surprisingly small portion of health care costs - just 10 cents of each dollar spent on healthcare goes to medicines, only seven cents of which is brand name medicines. These medicines are giving more and more patients longer, better lives, and help control overall healthcare spending by reducing invasive surgeries and expensive stays in the hospital and nursing homes.
A large body of research shows that proper use of medicines can help offset overall medical costs by preventing or delaying the need for other costly services, such as emergency room visits and hospitalizations. For example, a 2009 Medicare study found that use of prescription drugs reduced hospitalization costs for Medicare beneficiaries.[i] In another study, a $1.00 increase in prescription drug spending saved $2.06 in hospital spending.[ii]
Diabetes: Medicines that control diabetes help prevent serious complications, reducing the cost of care for this chronic disease.
New diabetes medicines are helping patients avoid serious complications and death, and can reduce overall healthcare spending. In one study, increased patient adherence to diabetes medicines saved $7 for every additional dollar spent on medicines. Patients with the highest level of medication adherence were significantly less likely to be hospitalized and had significantly lower total medical spending than less adherent patients.[iii]
Alzheimer's Medicines Have the Potential to Save Trillions
A new report from the Alzheimer’s Association finds that on our current trajectory Alzheimer’s disease in adults over 65 will cost $1 trillion per year by 2050 and a total of $20 trillion in the next 40 years. New disease-modifying treatments could change that trajectory, though. A new treatment that delays the onset of disease by 5 years would push back the growth in new cases reducing the number of people with the disease by 43% and saving $447 billion a year by 2050. A treatment that slows the progression of AD by 5 years would reduce the number of people in the severe stage of the disease by over 80% and save $197 billion a year by 2050.[iv]
Heart failure: Patients with heart failure who are treated with beta-blockers live longer and treatment costs are $3,959 lower than patients who do not take these medicines.
A January 2004 study by Duke researchers found that "beta-blocker therapy improves the clinical outcomes of heart failure patients and is cost saving to society and Medicare." The study, which was written before enactment of the Medicare drug benefit, notes: "If medication costs were completely reimbursed by
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Medicare, program savings from beta-blocker therapy would remain positive."[v] Looking more broadly, the researchers found that five years of treatment for heart failure without beta-blockers cost a total of $52,999. With beta-blockers added to treatment, total treatment costs fell by $3,959, patient survival increased by an average of about three-and-a-half months, and patients needed fewer overnight hospital stays.
Depression: New medicines brought down the cost of treating depression in the 1990s by reducing the need for hospitalization.
New studies are showing how newer, better medicines reduce the cost of treating people with depression. The cost of treating a depressed person fell throughout the 1990s, largely because of a switch from hospitalization to medication," the Wall Street Journal said in a December 31, 2003, story on the study. The study, published in the Journal of Clinical Psychiatry in December 2003, found that per-patient spending on depression fell by 19% over the course of the decade.[vi]
While medicines play a relatively small role in rising health care spending overall, it is important to ensure that individuals with large costs have affordable access to their medicines. Good insurance coverage for all Americans is a key first step, and the prescription drug benefit under Medicare Part D is helping to ensure that seniors and people with disabilities can afford the medicines they need. In just its fourth year of operation, more than 26 million enrollees have joined Medicare Part D,[vii] about 14 million of whom previously were uninsured or lacked comprehensive prescription drug insurance.[viii] As a result of Part D, more than 90% of all Medicare beneficiaries now have prescription drug coverage.[ix] Consequently, many seniors’ spending fell significantly; from 2005 to 2007, the average monthly out-of-pocket cost for prescription drugs went from $73 for those without prescription drug coverage in 2005 to $42 in 2007 for those who had enrolled in Part D.[x]
Needy patients without prescription drug coverage should also know that help is available through the Partnership for Prescription Assistance (PPA). This program brings together 475 patient assistance programs that provide 2,500 medicines for free or nearly free. In the last five years, more than 6 million patients have been helped. Learn more about PPA
"New drugs often reduce overall health costs. For diseases such as ulcers, a few pills have replaced major surgery. New drugs also shorten hospitalizations and prevent the costly complications of chronic diseases such as diabetes and high blood pressure."
- Dr. Mark McClellan, Then-FDA Commissioner, September 25, 2003
[i]B. C. Stuart, J. A. Doshi, and J. V. Terza, “Assessing the Impact of Drug Use on Hospital Costs,” Health Services Research 44, no. 1 (2009): 128–144.
[ii]B. Shang and D. P. Goldman, “Prescription Drug Coverage and Elderly Medical Spending,” National Bureau of Economic Research Working Paper 13358, September 2007.
[iii] M. C. Sokol, et al., “Impact of Medication Adherence on Hospitalization Risk and Healthcare Cost,” Medical Care 43, no. 6 (2005): 521–530.
[iv] Alzheimer’s Association, “Changing the Trajectory of Alzheimer’s Disease: A National Imperative,” May 2010, http://alz.org/alzheimers_disease_trajectory.asp?type=homepageflash.
[v] PA Cowper, et al., "Economic Effects of Beta-Blocker Therapy in Patients with Heart Failure," The American Journal of Medicine, 116 (2004): 2, 104-111.
[vi] PE Greenberg, et al., "The Economic Burden of Depression in the United States : How Did It Change Between 1990 and 2000?" Journal of Clinical Psychiatry, 64 (2003): 1465-1475.
[vii] Centers for Medicare & Medicaid Services, 2009 Enrollment Information (as of February 1, 2009).
[viii] The Lewin Group, Benefi ciary Choices in Medicare Part D and Plan Features in 2006 (Falls Church, VA: The Lewin Group,September 2006), www.lewin.com/content/publications/3849.pdf.
[ix] MedPAC, A Data Book: Healthcare Spending and the Medicare Program (Washington, DC: MedPAC, June 2009), www.medpac.gov/documents/Jun09DataBookEntireReport.pdf.
[x]Amundsen Group, Verispan Longitudinal Data, analysis for PhRMA, May 2008.
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