Prescription Drug Costs in Primary and Secondary Care - Essay Example

Prescription Drug Costs in Primary and Secondary Care It is common knowledge that disease management can save money individuals, families and governments a lot of money. For this reason, disease management programs were developed initially by companies who would benefit from such activities. Fear has emerged that the profit motive of selling of drugs and disease management would interfere with the provision of quality health care. These worries have been soothed by the need for physician groups to control health care costs, as reimbursement decreases and expenses increase (British medical association, 2006). For a long time, disease management programs have been developed by physicians. However, their involvement focuses naturally on the health care aspects. Reduction of the costs of care is often a beneficial by-product of such disease management programs. Reduction of cost in most cases is a secondary goal and, importantly, not always achieved. Since economic forces continue to be important drivers of health care policies and managed care programs, it is important for the physician to understand some aspects of medical economics - that there are certain vulnerable groups in the society who cannot afford the ever rising costs of prescription drugs. The concept of disease management is relevant to care needed by a population with a given disease, instead of focusing on individually taken decisions during multiple physician-patient interactions. Disease management principles have always been considered as health care principles; they were indeed adopted from the business world. However, health differs from money. One cannot trade health across time or between individuals, and it is not stable, but affected by illness severity. Moreover, many health outcomes are irreversible. Other aspects of a market-based approach do not fit well with health care, because most health risks are unique as noted by Dewar (2009). Individual values placed on those risks differ widely among individuals. Therefore, health can be converted to monetary terms only with difficulty (Netten and Curtis, 2002). Health care industry is so complex that economic evaluations are not easy even when estimated for a population. Cost identification or minimization analysis simply estimates the costs to produce an intervention. For disease management, this analysis is used to identify interventions where cutting costs would seem to have little impact on outcome, such as provision of drugs at lower costs. However, as simple as this seems, estimating costs of health care services can be very difficult, and is limited mostly to procedures of tests. For example, the cost of drugs and dispensing of drugs may include manufacturer discounts or consumer co-payments. Charges for hospital costs may equal charges only by chance, as some components are discounted and others are charged more heavily (Dewar, 2009). Non-hospital institutional such as nursing homes charges are usually not known, and may vary widely. Non-institutional labor costs, such as physicians, are usually not included in any cost analysis. There is still little agreement on how to value physician time. Costs borne by patients are usually unknown, including lost income, home care, and care visits to doctors. All these lead to high costs of prescription drugs. However, it is important to note that low prices of prescription drugs will assist those who can not obtain health insurance services such as the poor and the elderly, to obtain affordable health care services. The cost of medicines can be a large part of the overall costs of treatment. As with other medical expenses, the uncertainty surrounding the need to incur drug expenses makes insurance coverage attractive. The high spending on drugs reflects a lack of coverage of drugs in insurance schemes that are operating. The high cost of drugs creates another problem as well. The medicines used to prevent and treat communicable diseases are associated with positive external factor; their consumption by one person benefits other people as well, by reducing their risk of infection. This makes subsidization appropriate, since the price set by the market would be too high and use rates to externally-generating medicines too low (Netten and Curtis, 2002). Universal access to drugs might be interpreted to mean that poor and near poor households ought to pay a low price even for medicines that involve no externality, so that the cost does not deter them from getting necessary medicines or push them into further poverty. This provides a rationale for the governments seeking to influence the retail price for all drugs, not just used to prevent and treat communicable diseases for poor and near poor households. In a totally free system where drug prices are fixed by companies, the companies often have a leeway to pursue their objectives of profitability and utilize practices to differentiate products, the result is usually more expensive drugs due to the costs of presentation and promotion of trademarks, which are not always justified taking into account the nature of the product (British medical association, 1980). On the other hand, schemes where there is total control of price fixing by government authorities, there are a number of effects. First, the price levels maintained are not very high, which can benefit a large number of consumers and contribute towards the well being of the population. Second, the regulation of competition has facilitated the creation of domestic pharmaceutical industries thus helping to reduce the price of drugs (Targan, 2010). Attention has been focused mainly on prescription drugs because of the increasing growth of prices. In addition, the notion has been due to the fact that most people lack insurance coverage on the drugs they really need the most. The elderly, who are the major users of prescription drugs, are less likely to have medical insurance than the younger generation since medical care does not always cover outpatient medical needs. High drug costs have caused panic in the private and public insurance programs. This has forced governments to increase their medical aid spending. The solution is to expand medical care coverage to include outpatient drugs (Ratner, 1994). Shifts in social patterns have resulted in increased demand for healthcare services. As social programs providing safety net services for children, families and patients requiring mental health services have become inadequate or absent, people often seek care through emergency departments. Social problems such as drug use and violent crime, including domestic violence, are major health care problems. Lack of referral sources for mental health care and coverage of medication costs for patients may result in worsening of illness (Wagstaff and Claeson, 2004). Drug costs are often not covered or only partly covered by insurance. Whether the exclusion of outpatient drug costs makes sense is debatable. It makes sense for insurance to focus on high cost low frequency costs, such as expensive inpatient drug treatment. But not covering outpatient drug costs mat prevent people from taking preventive measures and seeking from a low level provider as soon as they fall ill. They may well get even sicker later and end up in a hospital, incurring large bills against which they are fully insured. The result may be higher costs for the entire insurance scheme. The fact that private insurers may cover drug expenses likely reflects a belief that covering certain preventive measures and outpatient administered medicines lowers overall costs (National Audit Office, 2007). No aspect of medical economy receives more attention today than the prices of prescription drugs, even though the substitution of pharmaceuticals for other medical treatments often involves significant savings to patients in both time and money. Many countries now control the prices of drugs and there are a variety of complicated ways in which this is done. Public policy regarding the pricing of drugs for its citizens is more complicated in a country that is also the home of a major pharmaceutical industry. It is much easier for a country which does not have a major domestic pharmaceutical industry, to regulate the price of prescription drugs (National Audit Office, 2007). Once drugs are off patent, generic versions that are chemically identical can be marketed. It is widely believed that generic drugs are sold for lower prices than equivalent brand name drugs, even when produced by the same company. Brand name drugs are frequently sold at higher prices after the introduction of generic substitutes than before. The reason for this is the decline in price elasticity of demand for the brand name drug after it is off patent (Stinnet and Mullahy, 1998). When the generic drug is introduced, the demand for the brand name drug decreases. However, the segment of the market that is loyal to the brand name drug has a demand that is less elastic than the total demand for the product during the time it was on patent. The producers of brand name drug often decide not to compete with the generic version of the drug, but rather to raise brand name prices in response to the decline in demand elasticity (Joint Formularly Committee, 2002). The current policy concern to shift the balance from secondary to primary settings is led by a desire to contain rising health care costs. There are few signs that giving secondary care budgets has achieved the desired shift. The realizations that current arrangements may not have gone far enough has increased interest in merging budgets for primary and secondary care. According to pharmaceutical industry representatives, as well as some independent observers, price control of prescription drugs has its disadvantages. Drug price regulation can threaten the continuation of drug innovation. Pharmaceutical industries content that drug price regulation would severely decrease the rate of new drug development. They maintain that high profits are required to support the high costs associated with new drug development (Ratner, 1994). Universal drug coverage, however, has shifted the burden of paying for drugs from the individual to the insurance system, thereby creating an incentive for the government to restrain growth and to maintain the financial stability of the health insurance system. In addition, the relatively high level of drug spending in several European countries has increased the importance to government officials of restraining drug spending growth (Welsh Affairs Committee, 2009). In response to the chronic pressure of rising health costs in general, and drug spending in particular, on health insurance systems governments have employed a variety of policies designed to restrain the increase in drug prices and spending. In implementing these policies, governments confront two conflicting goals: the reduction of the costs of pharmaceuticals to the national health insurance systems; and the maintenance of incentives to encourage pharmaceutical manufacturers to continue developing new drug products and attract industrial investment from the international pharmaceutical industry (Stinnet and Mullahy, 1998). When governments or large healthcare organizations have imposed standards or recommendations of care, it has been usually in areas of public health or preventive medicine, for example, vaccines and fluoridated water. In recent decades, as the largest payers have incurred financial risk, economic pressures have developed to control management of diseases in a population of patients, rather than in individuals. The major important of these reasons have been increasing expenses, the resultant increased financial risk to both payers and patients, the more widespread availability of information on the cost of health care and increased patient and payer education. These factors have created a market demand for better value without sacrificing quality of care (White and Ernst, 2008). Because drug costs were easily identified and a large component of total health care costs, pharmaceutical companies were among the first groups to find it in their interests to become involved in disease management programs. Drug spending represented a significant percentage of total health care spending and the data on prescription drug use were relatively easy to identify. Other problems associated with drug use also added to the total expense of health care, the resolution of which would lower the costs. These problems included prescription errors, complications of drug therapy and non utilized drugs once prescribed. The most common errors are due to lack of knowledge of the drug, lack of information about possible drug interactions or allergies and incomplete or poorly legible prescriptions (Blanch, 2001). Affordable medical care is necessary to all citizens. Investment in health care by the government should not be seen as a waste of resource. A healthy nation is crucial for the growth of the economy through active participation in economic activities. Poor health practices and high drug costs are not good for the growth of a nation. References Blanch, P (2001). Saving money on medicines: the drugs budget handbook. London, Radcliffe Publishing. Pp 235-245. British medical association (1980). Journal of epidemiology and community health, volume 34. London, British medical Association. Pp 119-122. British medical association (2006). “BMJ: British medical journal” London, The Association. Volumes 7532-7538. Pp 200-220. Dewar, D (2009). Essentials of Health economics. London, Jones & Bartlett Learning. Pp 107-113. Great Britain: National Audit Office (2007). Prescribing costs in primary care. London, the Stationery Office. Joint Formulary committee (2002). British national formularly. 44 ed. London, british medical association and royal pharmaceutical society of great Britain. Netten A, Curtis L (2002). Unit costs of health and social care. Canterbury, personal social services research unit, university of Kent and Canterbury. Ratner, J (1994). Spending controls in four European countries. London, Routledge. Stinnet A, Mullahy J (1998). Net health benefits: a new framework for the analysis of uncertainty in cost-effectiveness analysis. London, medical decision making. Pp 68-80. Targan, S (2010). Inflammatory Bowel Disease: Translating basic Science into Clinical practice. London, John Wiley and Sons. Pp 305-315. Wagstaff, A and Claeson, M (2004). The millennium development goals for health: rising to the challenges. London, World Bank Publications. Pp 120-130. Welsh Affairs Committee (2009). The provision of Cross-border health services for Wales: fifth report of session 2008-09; report, together with formal minutes, oral and written evidence. London, the stationery office. Pp 21-45. White AR and Ernst E (2008). Economic analysis of complemenmtary medicine: a systematic review. London, Complement Ther Med. Pp 111-118. Read More