Measuring the costs and benefits of pharmaceutical expenditures

In response to concerns about the cost burden of medical care in general and rising pharmaceutical costs in particular, a number of recent studies have examined trends in pharmaceutical expenditures. These studies have reached apparently disparate conclusions about factors responsible for rising pharmaceutical costs and the role that price and volume increases have played. In this paper, we examine methodological approaches that have been used to describe and analyze trends in medical and pharmaceutical expenditures using recent studies as examples. We present in detail one methodology for decomposing the factors of pharmaceutical spending and describe how variation in method can affect study findings. Finally, we consider some research extensions that we feel could considerably improve our understanding of the costs and benefits associated with pharmaceutical expenditures.