Prescription drug costs in Md. soar 22%

Increase accounted for nearly half of rise in health care in 1999

New drugs No. 1 factor

Health care cost in state rose 4.6%, below U.S. average

January 12, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

Spending by Marylanders on health care increased by a relatively modest 4.6 percent in 1999 - but spending on prescription drugs increased by 22.2 percent, according to an annual state report on health costs.

In all, Marylanders spent $19.1 billion on health care in 1999, $846 million more than the year before.

But the $399 million rise in prescription drug costs accounted for 47 percent of the total increase, according to the report released yesterday by the Maryland Health Care Commission.

Nationally, prescription costs have been the largest component of health inflation. In 1999, prescription drug costs rose 18.4 percent, according to the Milliman and Robertson Health Cost Index.

New medicines were the largest factor in the rise in prescription drug costs in Maryland, said Linda Bartnyska, chief of cost and quality analysis for the commission, in presenting the report.

"New drugs cost about twice as much as older branded drugs," and also expand prescription use by offering "treatments that didn't exist before," she told the commission.

She also attributed the rise to higher prices for older drugs (accounting for 22 percent of the increase in costs) and higher use of older drugs (13 percent of the increase).

Moreover, drug companies have been able to increase demand by direct-to-consumer advertising, she said.

And they have been able to keep prices high by varying the formula for older drugs thereby allowing them to extend patents that would have otherwise expired. The patents bar generic competitors from offering the drugs more cheaply.

Dr. Catherine Smoot-Haselnus, a commission member, said the rapid increase in prescription drug costs may require the panel to limit pharmaceutical benefits in state-regulated insurance packages for small employers.

Overall, Maryland's 4.6 percent increase in health care spending was less than the 6.4 percent national figure, and less than the 5.3 percent increase in Maryland the previous year.

Health cost increases in most regions of the state were close to the state average, except in Southern Maryland, where spending rose 8.3 percent.

Ben Steffan, the commission's deputy director for data systems and analysis, said the Southern Maryland increase reflected economic growth in the region, which reduced the number of uninsured, and a shift from HMOs to more expensive health plans.

The commission's report is primarily based on claims data from private health insurers, plus Medicare and Medicaid programs.

The commission gave final approval to a report to the General Assembly recommending that it leave unchanged the regulatory system that determines the need for new programs at health institutions.

Under review were five areas: obstetrics, heart surgery, nursing homes, home health and hospice care.

Those services require a "certificate of need" from state health planners before new programs can be launched or facilities built.

The legislature last year directed the commission to review its planning system.

The commission has been considering reports on different programs since June, and, while deciding to fine-tune its rules in some cases, did not recommend deregulation of any of the services. It now will review its certificate-of-need process in other areas, including ambulatory surgical centers, transplant programs and substance abuse treatment centers.

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