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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, PH.D., B.S.PHARM., is Associate Consultant, Division of Health Care Policy and Research, Mayo Clinic, Rochester, MN. LEE C. VERMEULEN, B.S.PHARM., M.S., is Director, Center for Drug Policy, University of Wisconsin Hospital and Clinics, Madison, and Clinical Associate Professor, University of Wisconsin—Madison School of Pharmacy, Madison. GLEN T. SCHUMOCK, PHARM.D., M.B.A., is Associate Professor and Director, Center for Pharmacoeconomic Research, College of Pharmacy, University of Illinois—Chicago, Chicago. PENNY GRIM, M.B.A., is Lead Business Analyst, Supplier Management; ROBERT J. HUNKLER, M.B.A., is Director, Professional Relations; and KARRIE M. HONTZ, M.B.A., is Director, Marketing, IMS Health, Plymouth Meeting, PA.

Address correspondence to Mr. Vermeulen at the University of Wisconsin Hospital and Clinics, 600 Highland Drive, M/C 9475, Madison, WI 53792 (lc.vermeulen{at}hosp.wisc.edu).

Purpose. Drug expenditure trends in 2004 and 2005, projected drug expenditures for 2006, and factors likely to influence drug costs are discussed. Summary. Various factors are likely to affect drug costs, including drug prices, drugs in development, and generic drugs. In 2004 there was a continued moderation of the increase in drug expenditures. Drug expenditures increased by 8.7% from 2003 to 2004. Through the first nine months of 2005, expenditures increased by only 8.1% compared with 2004. This moderation can be attributed to several factors, including the continued trend toward higher prescription drug cost sharing for insured consumers, growing availability of generic drugs, and lack of "blockbuster" new drugs in recent years. Drug expenditures in 2006 will likely be influenced by similar factors, with few costly new products reaching the market, increased concern over product safety slowing the diffusion of those new agents that do reach the market, and several important patent expirations, leading to slower growth in expenditures. Conclusion. Forecasting and managing rising drug expenditures remains a challenge. Pharmacy managers must remain vigilant in monitoring drug costs in their health system and take a proactive role in pursuing efficient drug utilization. The dynamic health policy environment further complicates drug budgeting and must be considered, especially in integrated health systems responsible for managing inpatient, outpatient, and clinic drug costs. The comparison of health-system-specific data and trends with the national information presented in this article may provide a useful context when presenting institutional drug costs to senior management. Index terms: Administration; Budgets; Control; Costs; Drug use; Drugs; Economics; Patents; Pharmacy, institutional, hospital; Prescriptions; Pricing; Product development; Rational therapy; Toxicity

 

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