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Rising drug prices a big driver of total health care costs

Health Care and Health Insurance
by Jacqueline Lee
Medicare chronic care improvement program works with some medicare medication sections.
Medicare chronic care improvement program works with some medicare medication sections.

It's no secret that health insurance premiums have risen sharply in recent years as other costs related to health care and management have skyrocketed. That trend was certainly observed in large part because prescription drug prices are seemingly always on the rise. This is an issue observed throughout the country, and which can significantly impact people's daily budgets.

In 2015 - the latest full year for which data is available - the per-capita spending on health care in the U.S. increased 4.6 percent to a total of more than $5,100, according to the Health Cost Institute. That was a larger annual increase than those observed in 2013 and 2014, and was up $226 from the latter year. Of that money, about $813 per capita was paid out-of-pocket, accounting for 15.8 cents of every dollar spent.

Prescription drug prices make up a large and growing portion of all health care spending.Prescription drug prices make up a large and growing portion of all health care spending.

How do prescriptions fit in?
In all, nearly 19 percent of all per capita health care dollars spent nationwide went to prescription drug costs, totaling $964 per person, the report said. But at the same time, the increase in prices for those drugs was the single largest observed for any one aspect of health costs in both 2014 and 2015. That number was up $77 per person over the one-year period, as well as $159 in just three years.

Moreover, brand-name prescriptions make up a significant portion of that per capita cost - $649 in comparison with just $313 for generic drugs - and likewise are growing at a faster rate than any other type of health care service, the report said. Meanwhile, generic drug costs were only up $10 annually and $39 over three years.

A problem in the Granite State
One place where this issue was acutely felt was the state of New Hampshire in 2015, where drug prices likewise make up a large portion of the average person's health care costs, according to new data from the state's Department of Insurance. While insurers pick up 84 percent of the costs associated with prescriptions in the state, and, the cost can still be quite high overall. The most expensive drugs in the state carry prescriptions totaling $17,000 a year, though insurance tends to pick up 99 percent of that bill.

While generics make up close to 84 percent of all drugs distributed, their low cost means they only account for 28 percent of all prescription spending in the Granite State, the report said. Drug costs accounted for about 19 percent of all health care spending there in 2015, up from just 16 percent two years earlier.

For these reasons, it's vital that consumers in need of prescription drugs for long-term treatment talk to their doctors about the best possible ways to keep those costs down, including increased use of generics. This may be particularly important especially as prices keep rising.



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