Drug prices tug on the economy of healthcare

Money Pills

Drug prices continue to bedevil the economics of the U.S. healthcare system in a variety of ways.

Prescription drug prices rose 7 percent between September 2015 and September of this year, according to a new report (.pdf) from the Altarum Institute's Center for Sustainable Healthcare Spending. No other category rose more than 2.9 percent. Hospital prices rose just 1.2 percent, although that's up significantly from the 0.7 percent annual increase between September 2014 and September of last year.

Meanwhile, Altarum's healthcare spending report (PDF) tells a slightly different story. Prescription drug spending rose only at a 4.5 percent annual rate between September 2015 and August of this year. That's down from the 7.2 percent growth rate from September 2014 to 2015, and the 12.4 percent rate between August 2013 and 2014.

However, hospital spending grew at a 6.6 percent annual rate in September, up from 3.4 percent between September 2014 and 2015. That's higher than the overall 5.5 percent growth rate.

That dovetails with forecasts that U.S. healthcare spending will reach 20 percent of the gross domestic product (GDP) by the middle of next decade. According to Altarum, it currently amounts to 18.2 percent of GDP. But another report suggested that the Affordable Care Act will actually cut healthcare spending over the long term by $2.6 trillion.

The report, which is closely read by many healthcare policy experts but gains little attention in most media circles, raised some concerns from advocacy groups.

“Altarum’s report is the latest in a steady drumbeat of evidence showing that drug prices are out of control,” said John Rother, executive director of the Campaign for Sustainable Rx Pricing, in a statement. “We urge the new administration and the new Congress to immediately address the rising cost of healthcare by delivering solutions that increase transparency, competition and value in the prescription drug market, and we look forward to working together to make drugs more affordable for citizens across the country.”

But Charles Roehrig, founder and head of the Altarum Center, had a slightly different take on the issue. “It is remarkable to see such slow growth in prescription drug spending in the face of such rapid prescription drug price inflation,” he said in a statement. “As a result, prescription drugs have recently exerted downward pressure on overall health spending growth while simultaneously driving overall health price inflation up.”