Prescription drug costs continue to soar
June 13, 2002
KALAMAZOO -- An explosion in U.S. drug prices has prompted calls for price controls, and for good reason, says Dr. William Fenn, a WMU professor of community health services. Drug prices have risen much faster in recent years than the cost of health care overall.
"Clearly the prices are rising out of proportion to anything realistic," Fenn says. "From 1994 to 2000, the overall increase in the cost of health care was approximately 34 percent. Over the same time frame, the increase in the cost of prescription drugs was 116 percent."
Fenn says the cost of drugs is helping to drive up the cost of health care in general.
"We are now at a point where health care consumes approximately 15 percent of our gross domestic product," Fenn says, "and that's projected to go up even more if something isn't done, compared to about 8 percent GDP for the other major industrialized nations of the world."
For all the complaints from drug companies about the rising cost of research and development, the cost of marketing drugs has surpassed what companies spend on R&D and has driven up drug prices, Fenn says.
"No longer are R&D costs the major cost that a drug company realizes," he says. "If you look, the single largest cost that a drug company has is marketing and that's by their own admission. They can quibble about how much, but the most accurate figure for 2000 is that marketing costs were 39 percent on average for the top 10 drug manufacturers, while R&D costs were only 22 percent."
Fenn adds that in the past five years, the major drug companies have increased marketing jobs by 59 percent, while R&D positions actually declined 2 percent.
Media contact: Mark Schwerin, 269 387-8400, mark.schwerin@wmich.edu