Just What The HMO Ordered: The Paradox Of Increasing Drug Costs

Open Access
Publisher Website
Google Scholar
Abstract
PROLOGUE: At least since President Richard Nixon declared a “war on drugs” in 1972, that phrase has been used as a call to arms against illegal drugs and the threats that they pose to public health and economic well-being. However, with managed care costs on the rise and the pharmaceutical industry being portrayed in some quarters as the primary villain in this new drama, the term “drug war” has taken on an altogether different meaning. In this dissection of the major issues that constitute the debate between managed care organizations and big pharma, J.D. Kleinke reports that the problem is not as simple as blaming managed care's cost woes on the rising costs of the pharmaceutical products that are covered in managed care plans. In fact, he writes that to some extent, “increasing pharmacy costs…represent the fulfillment of managed care's original promise” to manage costs by managing disease. Kleinke's prescription is for managed care organizations to become more economically sophisticated in their approach to determining pharmaceutical benefits. Kleinke is president of Health Strategies Network, a health information technology research company in Denver, Colorado. He is a frequent and vigorous commentator on the business of health whose work regularly appears in both the professional literature and more popular forums. His latest book, Bleeding Edge: The Business of Health Care in the New Century, was published by Aspen in 1998. Kleinke holds a master's degree in finance from the Johns Hopkins University. Drug companies argue that newer, more expensive drugs offset other medical costs; health plans counter that they increase pharmacy costs more than they offer a “pharmacoeconomic” benefit. Neither side is universally right or wrong, and neither has the data to support its case. Increasing drug costs for selective therapeutic classes represent the fulfillment of managed care's original promise. Certain therapeutic classes of drugs offer pharmacoeconomic benefit, while others represent induced costs in excess of this benefit. Health maintenance organizations (HMOs) should determine one from the other and incorporate these findings into their plan designs; multitier drug coverage is the best method to achieve this.

This publication has 5 references indexed in Scilit: