Projecting future drug expenditures - 1999

Drug cost projections for 1999 and factors that are likely to influence dru g costs are discussed. The producer price index indicates that the prices of drugs and pharmaceuti cals increased sharply, by an average of 10.2%, during the first 10 months of 1998, compared with just 2.1% for all of 1997; the price of pharmaceutic al prescription preparations increased by an average of 17.4% in the first 10 months of 1998-an increase of more than six times the average increase f or 1997. In the first quarter of 1998, many generic drugs had major price i ncreases. All these increases may be a sign of considerably higher drug cos ts in 1999. Group purchasing organizations predict price increases in 1999 of 3% for contracted drugs, 5% for noncontracted drugs, and 8% for current and newly marketed drug products. FDA has been able to decrease the time ne cessary to approve new drugs under the Prescription Drug User Fee Act of 19 92 and will be expected to decrease the time even further under the FDA Mod ernization Act of 1997. Increases of 10-12% or more in managed health care coverage rates are being predicted for 1999, with even larger increases exp ected for fee-for-service plans. Managed care organizations point to the co st of prescription drugs as the major reason for their rate increases. Last year's prediction that we may be entering a period of smaller increase s in drug costs was not fulfilled in 1998; all signs point to even higher d rug costs in 1999.