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JAMES M. HOFFMAN, PHARM.D., M.S., is Medication Outcomes Coordinator, Pharmaceutical Department, St. Jude Children’s Research Hospital, Memphis, TN. NILAY D. SHAH, B.S.PHARM., M.S., is Medication Use Policy Analyst, Center for Drug Policy, University of Wisconsin Hospital and Clinics (UWHC), Madison, and doctoral candidate, Department of Population Health Sciences, Medical School, University of Wisconsin—Madison. LEE C. VERMEULEN, B.S.PHARM., M.S., is Director, Center for Drug Policy and Clinical Economics, UWHC, and Clinical Associate Professor, University of Wisconsin—Madison School of Pharmacy. ROBERT J. HUNKLER is Director, Professional Relations, and KARRIE M. HONTZ, M.B.A., is Senior Director, Business Development, IMS Health, Plymouth Meeting, PA.

Address correspondence to Mr. Vermeulen at the University of Wisconsin Hospital and Clinics, 600 Highland Avenue, F6/133-1530, Madison, WI 53792 (lc.vermeulen{at}hosp.wisc.edu).

Purpose. Drug expenditure trends in 2003 and 2004 and projected drug expenditures for 2005 are discussed. Summary. Various factors are likely to affect drug costs, including drug prices, drugs in development, and generic drugs. In 2003 there was a continued moderation of the increase in drug expenditures. Drug expenditures increased by 11.4% from 2002 to 2003. Through the first nine months of 2004, expenditures increased by only 8.7% compared with 2003. This moderation can be attributed to many factors, particularly patent expirations, prescription-to-nonprescription conversions, and a continued slowdown in new drug approvals. Higher cost sharing for consumers and continued weaknesses in several sectors of the U.S. economy affecting employment levels and insurance coverage also contributed to this smaller increase in drug utilization. It is expected that 2005 drug expenditure growth will outpace the growth in overall health care expenditures and growth in the economy. Conclusion. In 2005, there should be a 10–12% increase in drug expenditures in outpatient settings, a 12–15% increase in clinics, and a 6–9% increase in hospitals. Index terms: Classification; Costs; Drug use; Drugs, over the counter; Drugs; Economics; Health care; Patents; Prescriptions; Pricing; Product development

 

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