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U.S. drug expenditures are expected to increase by 15 to 19 percent this year

A new study forecasts a 15.5 percent increase in drug expenditures in 2002 for hospitals and clinics and an 18.5 percent increase for outpatient care settings. This rise will be driven by price inflation and inflationary factors unrelated to price, including increases in therapeutic intensity and the expected approval of new drugs by the U.S. Food and Drug Administration. One medication likely to have the highest impact on hospitals in the next year is drotrecogin alfa for the treatment of sepsis (blood infection). The cost for this medication is expected to range from $3,000 to $10,000 per patient per course of therapy.

Other factors likely to influence medication costs include a growing number of generic medications to replace expiring patents on brand-name medications, legislative initiatives to make medications more available to the elderly, and the recent acts of terrorism committed against the United States, according to the researchers who conducted the study. They are from the University of Wisconsin, the U.S. Pharmacopeia, and IMS Health in Plymouth Meeting, PA.

The generic market is expected to grow substantially by 2005, with an estimated $35 billion in patent expirations. However, newer brand-name drugs and changing treatment patterns may limit the potential cost reductions associated with these brand-to-generic shifts. Also, the effective patent life of brand-name drugs is expected to be extended as long as 15.4 years, leading to decreased market share for generic drugs.

Congress continues to struggle with the design of an outpatient drug benefit for seniors, with many proposals pointing to cost shifting from publicly funded programs to the private sector. This might result in hospitals and other health care groups experiencing drug cost increases. Finally, the recent anthrax scare and other terrorism attacks may lead to increased costs for antibacterial agents and vaccines. This research was supported in part by the Agency for Healthcare Research and Quality (National Research Service Award training grant T32 HS00083).

More details are in "Projecting future drug expenditures—2002," by Nilay D. Shah, M.S., Lee C. Vermfulen, M.S., John P. Santell, M.S., and others, in the January 15, 2002 American Journal of Health-Systems Pharmacy 59, pp. 131-142.

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