Third Parties Control 83 Percent of Prescription Drug Spending, Up from 52 Percent in 1993

Adam J. Fein of Drug Channels has written a short article describing the evolution of payment for prescription drugs. In just twenty years, patients’ share of payments dropped from almost half of the spending to just 17 percent. Even worse, Fein forecasts, the share will drop to 12 percent by 2023.

Of course, if you look at the first graphic in his article, you see that most of the third-party-payer growth is from government spending, while private insurance shrinks as a share. By 2023, 45 percent of prescription drug spending will be controlled by government.

Does anyone really think that the government will continue to hold back from fixing prices as its share of spending becomes increasingly dominant? This is a time bomb for the pharmaceutical industry.

Even worse, most people who use prescription drugs are capable of paying for them directly: We live in an era of paying $4 for a month’s supply of commonly used medicines. And yet, the truly sick – cancer patients and the like – are stuck with out-of-pocket bills for many thousands of dollars.

This is pretty much the opposite of what health insurance should look like.

John R. Graham is a Senior Fellow at the Independent Institute.
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