Prescription Drug Costs to Rise This Year

Inpatient and outpatient services continue to make up the bulk of increased medical costs for a typical American family of four, according to a study by Milliman Research. But medication and other pharmacy expenses are expected to grow at a faster rate.

“For the first time in three years, pharmacy cost trends exceeded other categories of service,” according to the fourth annual Milliman Medical Index (MMI). “Physician cost once again increased at the lowest rate. “

Prescription drug costs will represent 15 percent of the $15,609 it will cost this year to cover an American family insured by an employer-sponsored preferred provider organization plan (“Medical Costs to Rise Nearly 8% this Year: Study,” June 4). That’s a 10.6 increase from 2007 and the first time in the four years of the study that pharmacy costs increased.

“The declining trend of 2006 and 2007 was the result of increased adoption of generic drugs: that adoption rate has now slowed,” according to the report. 

Milliman said spending on pharmacy drugs will continue upwards because few patents on high volume drugs are expected to soon expire, which would allow a generic to come to market. For example, it’s not until 2010 that the patent on Lipitor, the huge selling cholesterol medication, is scheduled to expire. However, a patent’s expiration doesn’t guarantee that a generic version will be created, Milliman said.
 
According to the MMI, hospital and physician services will comprise 81 percent of the estimated $15,609 It will cost in 2008 to cover an American family of four, a $1,109 increase from last year.  Hospitals and physician services will contribute $530 and $315 respectively to the increase, the MMI said. Prescription drugs will contribute $221.

Seattle-based Milliman is a 60-year-old management consultant providing expertise on employee benefits, health care, insurance, and financial services.