Cost-Containment as Part of Pharmaceutical Policy

Abstract

In this article the authors provide insight into the basis for price setting of medicines, the increasing pharmaceutical budgets in the past decades, and the measures governments and insures have taken to curb rising pharmaceutical costs. Four reasons are out lined for the fact that medicines are by some considered expensivey: 1) there are fundamental differences between medicines and other consumer products; 2) medicines are technology requiring an inordinate amount of research and development; 3) medicines are developed, manufactured, and distributed according to strict regulatory requirements; 4) medicines are most often selected by a physician for a specific patient and reimbursed in whole or in party by a third-party insurer or the state. Pharmaceuticals mean share of GDP has been 1.2% in OECD countries in recent decades. Pharmaceuticals accounted for 15.4% of total health expenditure, with public spending about half of this amount. Since 1970, the average share of GDP for pharmaceuticals in most countries has increased 1.5% more per year than GDP growth. Four types of strategies to curb rising Pharmaceuticals costs are described and a taxonomy of strategies provided These are:1)price and profit controls; 2) reimbursement system charges; 3) other fiscal measures; 4) quality measures. Pharmaceuticals policy has suffered from the pervasive misunderstanding that drugs are like any other commodity; resulting in policy makers viewing pharmaceuticals expenditures without thinking about drugs in their proper content of health care. The authors conclude by advocating a balanced approach to policymaking in a environment of rising pharmaceuticals costs.