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New PwC report finds medicine spending still small share of health spending, concerns may trigger ‘false alarms’

Holly Campbell
Holly Campbell June 23, 2016

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In case you missed it, PwC Health Research Institute’s (HRI) Medical Cost Trend: Behind the Numbers 2017 report highlights medicine spending is “still a relatively small portion of overall health spending and, as such, concerns of ever-increasing cost growth from new cures may trigger false alarms.”

HRI underscores the importance of understanding the weight of hospital inpatient and outpatient services, physicians and prescription medicines on medical costs to put health spending in context. While claims of so-called skyrocketing medicine prices make for great headlines, medicines “do not always have a big impact on medical cost trend,” and “a 10 percent jump in the growth in prescription drug spending would increase the overall medical cost trend by about 1.7 percent.”

In addition, HRI projects that continued aggressive negotiations by pharmacy benefit managers (PBMs) will further control costs and that when there is competition among medicines in a class, PBMs can negotiate more significant discounts and rebates.

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"With increased appetite from employers to narrow their formularies to one treatment option, PBMs are using competition between products to more aggressively negotiate drug costs,” according to HRI.

“Reflecting the demand for value, the future of PBM contracting points toward paying for results and cures, not fee-for-service, around drug costs.”

This is yet another report showing how the competitive biopharmaceutical market works to control costs and deliver new innovative treatments and cures patients desperately need. 

Read more at www.phrma.org/cost.

Topics: Drug Cost