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October 2002
The Prescription for the Prescription Drug Predicament
By John Paul Galles

    Containment of prescription drug costs is and will continue to be an increasingly important issue across the country. According to the Centers for Medicare and Medicaid Services, in the United States, prescription drug spending doubled between 1995 and 2000 as expenditures reached $122 billion. By comparison, spending for physician and clinical services grew by about one-third, and expenditures for hospitals increased by one-fifth.

     Workers today realize that their economic stability and their quality of life, as well as those that depend on them, could be significantly diminished not by the onset of old age and its “accompanying maladies,” but by the cost of the drugs and devices necessary for their very salvation as a result of a random accident, hereditary condition or inopportune disease. In a day and age when insurance companies are not contractually bound to be as faithful to you as you have been to them in paying premiums, the sudden need for diabetic medications, life-saving operations, artificial valves or other life maintenance drugs and devices, most often results in substantial premium increases, often unaffordable, and cancelled policies. Reasonable insurance coverage may not exist at premiums you can afford; as a consequence, you may not be able to obtain any coverage at all.

    When new drugs are introduced, they are generally protected from competition for a period of seven years before lesser-priced “generic” alternatives can be introduced to the market. Drug companies argue that the patent protections are necessary for them to recover their costs of research and development and are justified given the costs of regulation that are imposed upon them. They also claim they need those prices to support continued research and development of new drugs.  They point to new and better drugs that the present system enables them to develop for improved quality and length of life to those already taking their drugs.

     Consumer advocates wanting to control prescription drug costs counter that drug companies spend almost two and one-half times as much on marketing, advertising and administration as they spend on research and development. They point out that prescription drugs cost less outside the U.S. than within our borders. They want increased competition and limited patent protection in order to lower drug costs. 

     It is clear that prescription drugs are driving up the costs of healthcare. It is also clear that there are many other factors also affecting health care costs. With the expensive technological advances in health care treatment, combined with the significant aging of our population base, not to mention the complexity of our present health care delivery system, this is truly one problem that we had better attack sooner rather than later.

     Eventually, we will need to decide the extent to which any individual is entitled to health care, instead of fending for ourselves and allowing the inequities of the delivery system itself provide for others. We all may have to pay higher premiums for someone else’s child’s need for a lifetime of maintenance medication for a condition such as asthma or diabetes. As a result, we may have to reduce our desires to eat out as often as we like, to have a new car every five years, or maybe even to pay off our home mortgages sooner or finance our own child’s college education. We have tough choices. And inevitably they have tough consequences.

      We are just beginning to realize the actual costs of health care – a benefit that has heretofore been provided to us mainly through our employers. As fewer employers are able to offer it, co-pays increase, and the labor force itself becomes increasingly transient, the question becomes, “How much of current income is necessary to provide for reasonable health care protection?” What if that is an outright 20 percent or 30 percent of income? That may mean a lifestyle change for much of America.

     We need to educate ourselves about the issues. We need to learn about the diverse stakeholders and consider what is to be an individual’s entitlement. We must seek the most fair resolution of competing interests. The result will be a compromise; not a simple solution, but a fairly complex resolution. What is most fair? Form a point of view and make it known. As business owners and executives, you may have a vast amount of experience and knowledge to draw upon and to share with others.

     The prescription for the prescription drug predicament will be written by those who are informed and choose to participate in the debate for reform. Start now!

John Paul Galles is the publisher of Greater Charlotte Biz.
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