Rising Drug Prices May Help Reduce Other Medical Costs, Study Says

February 24, 2017

With rising costs of everything from milk to gasoline, it’s no surprise that prescription drugs are also getting more expensive, but what may surprise people is that higher drug prices help decrease the cost of other medical services.

According to industry analysts Mark Farrah Associates, as the cost of prescription drugs, which represent about 10.3% of American health-related spending, were increasing, hospital spending and other medical costs showed a “marked decline.” According to the study MFA engineered, physician and clinical service prices also fell when drug costs peaked.

While health care expenses have continued to rise over the last two decades, current increases are far lower than they were in the early 1990’s when annual expenses increased by double-digit numbers, instead of the single-digit increases we see today. In contrast, prescription drug prices began climbing at double-digit rates as long ago as the 1980’s and continued to do so until the increases peaked at 18.1% in 1999, and then began to descend over the next six years, through 2005.

A comparison of the percentage of increases in prescription drugs vs. other health care expenditures during the period from 1961 to 2006 shows that rising drugs costs helped offset the prices of other services.

Currently, Americans spend more than $216 billion on prescription drugs each year.