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Study casts doubt on value of drug spending

A new NEJM study casts doubt on the idea that spending on pharmaceuticals results in savings in other areas, such as doctor visits

A new study in the New England Journal of Medicine casts doubt on the idea that spending on pharmaceuticals results in savings in other areas, such as doctor visits, an argument that the pharma industry has often invoked during debates about the cost of prescription drugs.

The study, conducted by a group of Harvard researchers, looked at geographic variation in Medicare spending as a way of measuring whether Medicare patients who spend more on pharmaceuticals to control their chronic conditions have fewer physician visits, reducing total costs. The researchers examined pharmacy and medical data on a 5 per cent random sample of people enrolled in stand-alone Medicare Part D prescription drug plans in 2007.

"If the coding practices in different regions are not too dissimilar, the substantial variation in pharmaceutical spending does not seem to be strongly associated with variations in medical spending at all," they concluded. The study also found that pharmaceutical spending represents more than 20 per cent of total Medicare spending on average.

Pharmaceutical Research and Manufacturers of America (PhRMA) senior vice president Ken Johnson responded to the study by pointing out that many other studies "have found that use of medicines helps patients avoid unnecessary hospitalisations and nursing home admissions, and also can help achieve savings on overall healthcare costs," especially when it comes to patients who have chronic diseases like diabetes, hypertension or high cholesterol.

"No one study, however well done, is definitive," Johnson said in a statement. "This study needs to be considered in the context of the large body of academic research on the relationship between medicines, health outcomes, and cost savings."

16th June 2010

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