Market Structure and Drug Innovation

An explosion of knowledge and a growing array of tools and technologies have transformed modern drug R&D, while its cost has risen by a sizable amount. At the same time, the unchecked increase in health care and prescription drug spending has spawned cost containment policies that are restricting the demand for drugs in all major markets. This Perspective explores the interplay between technological advances and regulatory policies and their likely impact on the dynamics of the pharmaceutical industry. Advances in the life sciences have profoundly transformed the drug research and development (R&D) process. That transformation has come at a price, boosting the cost of developing a new molecular entity (NME) to 802 million by 2000. More expensive R&D, combined with an aging population and better diagnostic techniques, has swelled drug spending in the United States, which reached 141 billion in 2001. These increases have in turn induced a spate of cost containment measures that are affecting demand for pharmaceuticals in all major markets. This Perspective considers the impact of the interplay between technological advances and health care policy on the future dynamics of the pharmaceutical industry.Pharmaceutical Industry, R&D Productivity, Health Care Policy

Influencing Physician Drug Prescription Habits Towards Cost Containment

In Israel, diffusion of clinical information systems is almost universal in ambulatory medical services. The drug prescription module embedded in a widely-used electronic patient record system has the capacity to intervene and notify physicians about available generic or therapeutic substitute drugs, when their first choice is outside the insurer\u27s preferred drug list. The objective of this paper is to study how such intervention influences drug prescription habits of physicians and helps contain costs. To this end we monitored system use for 40 weeks, recording physicians’ willingness to change their choice to a substitute following system notification. Findings show higher physician compliance with generic substitutes than with therapeutic substitutes, based on a cognitive decision process upon notification, and increase in compliance over time, until stabilization. The resulting direct financial savings on expenditure for drugs, estimated to be 4.7% for chronic drugs, entail long-term savings

Cost Containment Strategies for Prescription Drugs: Assessing the Evidence in the Literature

Outlines various options for addressing prescription drug spending growth, including a description of each cost containment strategy, its use by private or public payers, and a discussion of known evidence about its effectiveness or cost saving potential

Effects of the New Cooperative Medical Scheme on village doctor’s prescribing behaviour in Shandong Province

Objective: To assess the effects of China’s new community health insurance, the New Cooperative Medical Scheme (NCMS), on village doctors’ prescribing behaviour. NCMS began in 2003. Method, In 2005 we conducted a quasi-experimental case-control study in Shandong Province, and collected information from 2,271 patient visits in 30 village health stations. Results, NCMS has adversely influenced prescribing behaviour of village doctors. Average number of drugs prescribed, percentage of prescriptions containing antibiotics, number of antibiotics per prescription, percentage of patients given injections, and average per prescription cost were consistently higher in NCMS village health stations than non-NCMS. Within NCMS villages, prescribing behaviour towards insured patients was significantly different to the uninsured. Conclusion, Over-prescribing is common in villages with and without health insurance, with grave concerns for service quality and drug-use safety. Policy implications are NCMS should be redesigned to exert more influence on health providers, with incentives for cost containment and service quality. Stricter regulatory environment for prescriptions is necessary to counter irrational drug-use and ensure people’s access to effective care at reasonable cost.

A Study on Generic Prescription Substitution Policy as a Cost Containment Approach for Michigan’s Medicaid System

High health care costs have left millions of people unable to buy health insurance and has broadened the state’s responsibility to protect low-income families through Medicaid programs. Increasing health care costs have created severe toll on fiscal management of federal and state governments. Prescription drugs are a significant part of Michigan’s Medicaid costs. Due to the economic recession and the downsizing of auto sector the number of Medicaid beneficiaries in Michigan has increased over the years. Thus it has increased Medicaid prescription drugs program costs at a fast pace, which creates fiscal burden on Michigan in administering the program and providing prescription drugs for its beneficiaries. Michigan has implemented several strategies for cost containment of Medicaid since 2001. These strategies have brought modest results in terms of cost containment in Medicaid prescription drugs program. This study examined whether a generic substitution policy of Medicaid prescription drugs in Michigan would be an efficient and effective cost-containment strategy. In doing so, it emphasizes three questions: First, will a generic substitution policy be an efficient strategy in containing Medicaid prescription drug program costs for Michigan? Second, if not in general, are there any “heavily used” brand drugs for which generic substitutes are available that can Michigan safely reduce Medicaid costs by implementing a higher use of generic substitution, thus saving the state in prescription drug costs through the generic substitution policy? Third, if the answer is yes for the two previous questions, then approximately how much money can Michigan save per year by implementing the generic substitution policy? This research found generic substitution policy as an efficient way in cost containment in Michigan Medicaid prescription drugs program

Will Health Care Reform Hurt the Economy and Increase Unemployment?

Outlines the likely effects of healthcare reform on the economy and jobs in 2010-19. Estimates health expenditures, offsetting effects, cost containment measures, benefits to state and local governments including new taxes, and impact on small businesses

External referencing and pharmaceutical price negociation.

External referencing (ER) imposes a price cap for pharmaceuticals, based on prices of identical or comparable products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm, whereas a home country (H) can either negotiate prices independently or implement ER, based on the foreign price. We show that country H prefers ER if copayments in H are relatively high. This preference is reinforced when H's population is small. Irrespective of relative country sizes, ER by country H harms country F. Our model is inspired by the wide European experience with this cost-containment policy. Namely, in Europe, drug authorization and price negotiations are carried out by separate agencies. We confirm our main results in two extensions. The first one allows for therapeutic competition between drugs. In the second one, drug authorization and price negotiation take place in a single agency.pharmaceuticals; external referencing; price negotiation;

Medicaid Prescription Drug Coverage: State Efforts to Control Costs

This paper provides a brief summary of the Medicaid prescription drug benefit. It explains the mechanisms being used by states to control their prescription drug spending within the Medicaid program. The paper also highlights some of the concerns that have been expressed with these mechanisms and the litigation that has been initiated in several states as a result of these efforts. It takes a closer look at three states with cost containment strategies that have been the focus of increased scrutiny

How Will the Affordable Care Act Affect Jobs?

Examines the argument that the 2010 healthcare reform law will destroy jobs, including claims about the increase in federal spending and likely effect on business. Considers impact relative to the economy's size, offsets, and cost-containment effects

Low Medicaid Spending Growth Amid Rebounding State Revenues: Results From a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007

Examines the implementation of the new Medicare prescription drug benefit and the rate of Medicaid spending growth and enrollment in 2006. Identifies possible state level changes in eligibility requirements, program expansion, and enrollment processes