Projecting future drug expenditures--1999

Drug cost projections for 1999 and factors that are likely to influence drug costs are discussed. The producer price index indicates that the prices of drugs and pharmaceuticals increased sharply, by an average of 10.2%, during the first 10 months of 1998, compared with just 2.1% for all of 1997; the price of pharmaceutical prescription preparations increased by an average of 17.4% in the first 10 months of 1998-an increase of more than six times the average increase for 1997. In the first quarter of 1998, many generic drugs had major price increases. All these increases may be a sign of considerably higher drug costs in 1999. Group purchasing organizations predict price increases in 1999 of 3% for contracted drugs, 5% for noncontracted drugs, and 8% for current and newly marketed drug products. FDA has been able to decrease the time necessary to approve new drugs under the Prescription Drug User Fee Act of 1992 and will be expected to decrease the time even further under the FDA Modernization Act of 1997. Increases of 10-12% or more in managed health care coverage rates are being predicted for 1999, with even larger increases expected for fee-for-service plans. Managed care organizations point to the cost of prescription drugs as the major reason for their rate increases. Last year's prediction that we may be entering a period of smaller increases in drug costs was not fulfilled in 1998; all signs point to even higher drug costs in 1999.