Projecting future drug expenditures--2001

Drug cost projections for 2001 and factors that are likely to influence drug costs are discussed. The year 2000 introduced many new factors into the decision-making process for drug pricing and raised new considerations regarding drug therapy, distribution, and costs. It is anticipated that drug costs will continue to increase at a rate of 11-15% in 2001. Research and development expenditures for new drugs continue to grow and are estimated to be $26.4 billion in 2000, but the number of new drug approvals, especially for new entities, has not increased significantly. The generic drug industry has been expanding, and sales of generics are expected to increase to $20 billion by 2005. Drug costs also keep rising, and sales may reach $243 billion by 2008; this amounts to 12.6% of total health care spending, compared with 8.1% in 1999. There is a trend toward increasing the rate of conversion of prescription drugs to nonprescription status; this may reduce drug budgets somewhat. 2001 will see new systems of drug distribution and pricing, a federal prospective pricing system for ambulatory care patients covered by Medicare, drug imports from foreign manufacturers, and states taking legal action to reduce prescription drug costs. Drug costs in 2001 are expected to continue to increase at double-digit rates. The increase in costs is due to increased utilization, to new products replacing older products, and to price increases for drugs currently on the market.