Determinants of growth in prescription drug expenditures
- Presenter:
Chair: Randall Ellis; Discussant: Allen Goodman Mon June 5, 2006 17:15-18:45 Room 235
Rationale: Over the last decade there has been a large growth in prescription drug expenditures in the United States. Spending on drugs more than tripled between 1993 and 2003, increasing from $51 billion to $179 billion (in 2003$). There is an increasing interest in understanding the factors affecting the growth in prescription drug expenditures as their impact on public and private healthcare budgets continues to increase.
Objectives: This study seeks to evaluate the role of changing population characteristics on the growth in prescription drug expenditures between 1997/1998 and 2001/2002.
Methodology: Using data from the Medical Expenditure Panel Survey (MEPS), we employ non-linear extensions of the Oaxaca-Blinder regression-based decomposition method to attribute the sources of growth in prescription drug expenditures. These methods decompose the total observed growth in expenditures into growth attributable to changes in population characteristics (covariates) and growth attributable to the changes in expenditure structure associated with population characteristics (parameter estimates). We implement the decomposition analysis using generalized linear models. Analyses are weighted reflecting both the sample design of the MEPS to represent the non-institutionalized, civilian, U.S. population and survey non-response.
Results: Total annual prescription drug expenditures almost doubled between 1997/1998 and 2001/2002, increasing from $73 billion to $143 billion. Average per capita expenditures grew by more than 70 percent, increasing from $292 to $501. Annual per capita prescription fills increased by 2 prescriptions per person per year. All major therapeutic classes and drug classes saw a significant growth in total annual prescription drug expenditures between 1997/1998 and 2001/2002. More than 40 percent of the growth in expenditures between these time periods can be attributed to changing population characteristics. Much of this growth can be attributed to the increasing prevalence of chronic conditions and “aging” of the population. Specifically, increase in prevalence for hyperlipidemia, hypertension, allergic rhinitis, psychiatric conditions (such as psychoses and schizophrenia) and gastroesophageal reflux disease explained 23 percent of the growth in prescription drug expenditures.
Conclusions: Our analyses found a significant growth in prescription drug expenditures in the U.S. between 1997/1998 and 2001/2002. We also observed significant growth in expenditures for all demographic characteristics, as well as, all major therapeutic classes for prescription drugs. These analyses revealed that a significant portion of the growth in prescription drug expenditures may be attributed to the changing prevalence of chronic disease in the U.S. population. These findings have important policy implications for future expenditures, especially with the projected demographic changes in the U.S. population.
