PROJECTING FUTURE DRUG EXPENDITURES - 1997

Use of the producer price index; data from independent sources, drug i ndustry analysts, group pur chasing organizations (GPOs), and health m aintenance organizations (HMOs); pharmacoeconomics; and legal developm ents to project drug expenditures and prepare pharmacy budgets for 199 7 is discussed. The producer price index indicates that prices for dru gs and pharmaceuticals increased 2.2% during January to May 1996; the increase for prescription preparations was 3.4%. Medi-Span reports an average increase for all drug products of 1.2% for the first six month s of 1996. IMS America data show the price of all drugs increasing 1.8 % between the second quarters of 1995 and 1996. Drug industry analysts project the overall price increase in the next 12 months at 2.5-5.0%. GPOs predict an average increase over the next 12 months of 2.2% for contracted drugs and 4.3% for noncontracted drugs. HMO pharmacy direct ors predict pharmacy expenditures will increase by 4.5% per member in 1997. Caution must be applied in using pharmacoeconomics to project dr ug costs and their impact on health care expenditures. Today's budget must account for the greater integration of drug expenditures into the institution's objectives, possible reductions in other service costs, capitation, competition, shifting of control of the drug budge; to sp ecific patient care centers, relocation of services to the ambulatory care setting, and outsourcing. Legal actions in 1996 that may affect p rice increases and drug budgets included a class-action lawsuit by com munity and chain pharmacies alleging price discrimination by manufactu rers and wholesalers. Prices of pharmaceutical products are fairly sta ble and may remain so in 1997, but projections of future drug expendit ures must account for the continuing reshaping of the health care land scape.