PROJECTING FUTURE DRUG EXPENDITURES - 1998

Drug cost projections for 1998, factors that directly influence drug c osts, and tools for projecting drug expenditures are discussed. The pr oducer price index indicates that prices for drugs and pharmaceuticals increased 2.1% between January and June 1997; the increase for prescr iption preparations was 2.7%. Medi-Span data show an average increase for all drug products of 1.02% during the first six months of 1997; Fi rst Data-Bank reports a 1.7% increase for the same period. IMS America data, which take account of weighting for individual drugs or drug cl asses, show the prices of all drugs increasing 2.3% between the second quarters of 1996 and 1997. Drug industry analysts project the overall price increase in the next 12 months at 2-4%. Group purchasing organi zations predict an average increase over;he next 12 months of 0.56% fo r contracted drugs and 3.6% for noncontracted drugs. Various health ca re provider indexes suggest that increases in drug costs could be smal ler over the next few years. The current trend of takeovers and merger s of pharmaceutical companies and health systems is likely to continue into 1998. As a result of generic competition and the loss of patent protection for many pharmaceutical products, the number of drugs to be introduced onto the market and the number of drugs in development are expected to escalate until the year 2000. These and other major chang es in the health care environment, including changes in drug distribut ion and controversies over the use of formularies, will make future fo recasting difficult. Compared with previous years, smaller increases i n drug costs have been projected for 1998 and beyond, but changes in t he health care environment mean that greater knowledge will be require d to forecast future drug expenditures.