Prescription drug costs continue to rise 17 percent spending increase blamed on heavily advertised, high-priced medications

For the fourth straight year, prescription drug spending rose more than 17 percent in 2001, driven in large measure by a handful of heavily advertised, high-priced medications, a nonpartisan study released Thursday found.

Sales of prescription medications at retail stores and through mail-order companies totaled $175.2 billion last year, an increase of $27 billion over 2000, according to the National Institute for Health Care Management. The institute is a private, nonprofit research organization led by physicians, insurance executives and policymakers from both parties.

Overall, pharmaceutical costs continue to be the fastest-rising component of health care expenditures, accounting for about 10 percent of spending. Although price increases were part of the reason for the jump, the researchers found that drug use and advertising also were prime factors. In short, more doctors are writing more prescriptions for the most expensive, heavily marketed drugs.

While the trend was criticized by some consumer advocates and politicians, pharmaceutical makers and some economists argued that today’s blockbuster drugs save not only lives but dollars over the long term.

“Although we talk about how fast drug costs are going up, this is helping to reduce the rate of growth of other medical costs,” said Frank Lichtenberg, an economist at Columbia University’s business school.

In a number of studies, Lichtenberg has found that modern medications help people live longer, with a better quality of life, spending less time in hospitals and more time contributing to society. “Ultimately, they provide tremendous benefits to society,” he said.

The lobbying group Pharmaceutical Research and Manufacturers of America issued a response detailing situations in which new drug therapies often eliminate the need for most expensive care. Those include cholesterol reducers, or statins, that lower heart disease and treatments for diabetes and asthma and antidepressants.

“You get a heck of a return on your investment,” said Lee Vermeulen Jr., director of the Center for Drug Policy and Clinical Economics at the University of Wisconsin Hospital. He said employers and government officials, who pay a large share of the medical bills, should recognize that investing in costly medication can translate into fewer sick days.

Nevertheless, Vermeulen said there is plenty of waste in the pharmaceutical industry and “ridiculous” decisions by doctors and patients about which medication to use in given situations. Take the people who insist upon eating fatty foods late at night and never exercise, he said.

“They don’t want to lose weight or change their diet or take Tums. They’re pummeled by advertising, so they go to the doctor demanding” a prescription medication such as Prilosec or Prevacid, he said. “That’s a waste.”

Frank Clemente, director of Public Citizen’s Congress Watch, said few doubt the value of the latest medical advances but he believes it appears the industry is price-gouging.

“The prices are greatly in excess of what they need to have research and development dollars,” he said. On average over the past decade, the pharmaceutical industry has been the most profitable by far, he said, reporting profits about three times the size of other Fortune 500 industries.