Pharma industry could feel the heat as US healthcare spending continues to slow

By Anna Lewcock

- Last updated on GMT

Related tags Cent Pharmacology

Although US spending on healthcare rose by 6.9 per cent in 2005,
taking it to almost $2 trillion (€1.5 trillion), it's the smallest
increase since 1999, down from 7.2 per cent in 2004 and 8.1 per
cent in 2003.

US government experts who compiled a report on the US national health spend lay the blame for the slow down largely on slower growth in prescription drug spending. 2005 was the first time since 1993 that prescription drug spend did not outpace overall healthcare expenditure, rising only 5.8 per cent to $200.7bn.

This drop in growth rate for prescription drugs was put down to increasing use of generics and a decline in Medicaid (the US health insurance programme for those with low incomes and resources) drug spending among other factors, including a drop in new drug introductions.

Prices of brand name drugs rose by 6 per cent, in comparison with overall drug prices increasing by 3.5 per cent.

Authors of the report note that it is unclear whether this slow down in healthcare spending is a sign of a continuing trend or is a more temporary situation. However, declining spend on prescription drugs would necessarily impact upon pharmaceutical firms manufacturing the drugs, and have a knock-on effect on their suppliers.

Back in 1999, growth rate for the prescription drugs was up at 18.2 per cent - significantly higher than the 5.8 per cent recorded in 2005.

Despite the slowing rate of healthcare expenditure, the US still spends more than twice as much than other industrialised countries per person per year, at around $6,697. According to the report, overall healthcare spending overtook the US inflation rate of 3.4 per cent in 2005, and accounted for 16 per cent of all economic activity in the US.

Total healthcare spend in the US is estimated to have reached $2.2 trillion in 2006.

The report​ is compiled by the Centers for Medicine and Medicaid Services.

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