US pharmaceutical and healthcare spending
Table I shows a comparison of US National Health Expenditures (CMS, 2010b).
It compares 1990 with 2009, the most recent year for which data are available. Total
nominal expenditures have increased three fold. General inflation accounts for some of
this. The consumer price index was up 65 per cent in this time period (Bureau of Labor
Statistics, 2011). The remainder of the increase is attributable to both increased real
prices and increased utilization, which in turn can be attributed to increased population
and greater utilization per capita. There have been several notable changes other than
rapid increase in overall expenditures. First, hospitals have become a smaller proportion
of total spending, falling from 34.6 to 30.5 per cent of national health expenditures. This
decline has been offset by the increase in retail prescription drugs, which increased from
5.6 to 10.1 per cent of spending. And this prescription drug spending excludes that which
occurs in hospitals. Much of the increase in retail pharmaceutical spending occurred in
the 1990s with generous levels of private insurance coverage for drugs, introduction of
new patented medications and a shift to more aggressive marketing techniques
including pharmaceutical detailing and direct-to-consumer (DTC) advertising. More
recently prescription drug spending has been growing at much slower rates although
this growth has held up during the recession, especially in 2009. Reasons for the
slowdown compared to the 1990s include a shift toward generics, a weaker pipeline of
new blockbuster drugs and safety concerns. There has been weak growth of per capita
utilization of prescription drugs in recent years, but slow spending growth has also been
driven by pricing (Hartman et al., 2010). Aggressive marketing by mass merchandise
firms has heavy discounted generics. Generics were estimated to account for 72 per cent