PROJECTING FUTURE DRUG EXPENDITURES - 1994

The use of information on inflation, generic competition, market intro duction of new drug entities, institution-specific drug-use patterns, and federal legislation to project drug expenditures is discussed. Inf lation of pharmaceutical prices has been decreasing over the past few years. Increases in the producer price index for drugs and pharmaceuti cals diminished from 6.9% in 1991 to 4.3% in the first half of 1993; t he specter of government regulation may be one reason. Pharmacy group purchasing organizations (GPOs) predicted that in 1994 expenditures wo uld increase an average of 2.1% for contracted drug items and 8.3% for noncontracted items. Expenditures for biotechnology drugs in January through July 1993 increased 16% over the same period in 1992; such age nts are now hospital pharmacies' third most costly drug category, at 1 0% of total expenditures. Future price competition by generic drug pro ducts can be predicted from information on patent or market-exclusivit y expiration. To predict the market release of new drug products, new- drug applications filed with FDA can be monitored. The most important component in projecting drug expenditures is a specific institution's pattern of use of high-cost drugs. Mechanisms that can be used to moni tor changes in therapeutic strategies and drug-use protocols include d rug cost indexes, assessment of drug-use patterns by outside companies , and computerized models for specific high-cost drugs. Drug expenditu res can be affected by legislative changes such as the Medicaid rebate provisions of the Omnibus Budget Reconciliation Act of 1990 and the M edicare outpatient drug benefit in the proposed American Health Securi ty Act. The accuracy of projections of drug expenditures can be improv ed by examining inflation, generic competition, the introduction of ne w drug entities, institution-specific drug-use patterns, and legislati ve issues. Pharmacy managers need better methods for estimating instit ution-specific use of high-cost drugs.