Who/What is Driving Healthcare Costs: The Role of Pharma in the Future of Healthcare?

COMMENTARY

Who/What is Driving Healthcare Costs? In the early-mid 90s the finger of blame pointed to managed care as failing to control escalating healthcare costs. Around the mid-90s the managed care industry was able to pass the black hat over to the pharmaceutical industry as the total cost of pharmaceuticals as a percentage of total healthcare costs began to rise rapidly [hmmm….more old people/chronic disease and more drugs to help? You see where this is going!]

Professor Uwe Reinhardt, PhD, James Madison Professor of Political Economy, Woodrow Wilson School and Chairman of the Department of Economics at Princeton University kindly provided us with a very thoughtful [and as always very amusing] viewpoint concerning the role of pharmaceutical manufacturers in the healthcare Industry. This is worth listening to. His lecture reminds me of the early days of the home care industry when legislation to encourage the use of home care [get the patients out of the expensive hospitals faster] was enacted. It worked… but shortly after people noticed that home care was “growing” 25-30% a year. So….they “whacked home care.” No one ever stopped to consider that a 25% increase in a sector that represented a very small fraction of the total cost of health care was hugely offset by [in terms of total dollars] by a 1-2% DECLINE [or smaller increases] in total hospital costs which represented a much larger percentage of total costs. HINT: the systems was spending more on home care but saving much more on reduced more intensive care costs. It seems that we could have used some math lessons.

Professor Reinhardt has been kind enough to help us with this latest math exercise to demonstrate that rising pharmaceutical costs are “perhaps good”. Kudos to Professor Reinhardt for this important lesson in economics. And many more thanks for making the lesson so much fun.

From 2006 Pharmaceutical Regulatory and Compliance Congress

The Role of the Pharmaceutical Enterprise in the Future of American Healthcare

Uwe E. Reinhardt, Ph.D.
James Madison Professor of Political Economy
Woodrow Wilson School, Princeton University
Princeton, NJ

Link to view the audio-cast: http://icvclients.com/ehcca/pharma_2006/3_1145/

Comments and Discussion - The IDMA Blog site [www.dmalliance.org/dmblog] is open for comments on Dr. Reinhardt’s views. We have also provided a brief survey concerning whether or not reader agree or disagree with the viewpoints offered in the audio cast concerning the role of pharma in future of American healthcare.

Many thanks to Peter Grant and our colleagues at Health Care Conference Administrators, LLC for providing us with access to Professor Reinhardt’s noteworthy viewpoints. The Audio cast was originally presented at the 2006 Seventh Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum, www.PharmaCongress.com, November 8 - 10, 2006, in Washington, DC:

FURTHER INFORMATION: To purchase a CD-ROM or Video iPOD of the 2006 Pharma Congress, click here. For further information, call 800-684-4549 or email registration@hcconferences.com. For more information about the 8th Annual Pharmaceutical Regulatory and Compliance Congress [November 7-9, 2007, Washington, DC] go to www.PharmaCongress.com