Report: Private Insurance Paying Nearly Half Prescription Bill; Drugs Consume 10 Percent of Health Budget

1/22/2004

From: Jim Jaffe, 202-775-6353 or jaffe@ebri.org, or Rachel Christensen Sethi, 202/775-6330 or sethi@ebri.org, both of the Employee Benefit Research Institute

WASHINGTON, Jan. 22 -- Prescription drug costs were the fastest growing component of the nation's medical budget in 2001, largely because Americans were taking more pills, according to new research from the Employee Benefit Research Institute. As a result, total drug costs comprised 9.9 percent of the nation's health expense, the highest percentage since 1960 (10 percent).

The new report notes that total drug costs increased by 15.7 percent in 2001, to top $140 billion. The study is published in the January EBRI Issue Brief ("Prescription Drugs: Recent Trends in Utilization, Expenditures, and Coverage") and also found that:

-- More than 60 percent of Americans filled at least one prescription in 2000.

-- More than half of those age 75 and older filled more than 15 prescriptions (including refills) during the year.

-- Roughly half of all prescriptions filled utilize generic drugs.

-- Evidence suggests that some higher drug costs result in lower medical bills in other areas, by avoiding the need for more expensive treatments.

-- Nearly all workers with employment-based health insurance have drug coverage. Such coverage typically includes a formulary (list of covered drugs) with a tiered benefit structure designed to make consumers sensitive to drug costs.

-- Individuals pay for slightly less than a third of the nation's drug bill. Nearly half is paid for by private health insurance.

The report notes that less than a third of the nation's growing prescription drug bill reflects higher unit costs for the medicine. The bulk of the costs are caused by rising consumption. It also notes that the Medicare drug benefit enacted last year that becomes effective in 2006 could have a major impact on drug spending patterns by the end of this decade.

"Prescription drugs are increasingly likely to be an integral part of a person's medical treatment," said EBRI President and CEO Dallas Salisbury, "and their heavy utilization explains the political and popular focus on the cost issue."