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Courtesy of Pharmboy at Phil’s Stock World
This article was originally published at Phil’s Stock World, and has been updated.
Costs of everything from food, oil and medicine have been increasing for American consumers. Health care is one expense that is increasing faster than inflation. Over the past 12 years, prescription drug prices have outpaced the two largest health care costs, hospital care and physician services (Figure 1). However, pharmaceuticals only make up 10% of all health care costs, while hospital and doctor costs make up 52% of the total $2.3T (Figure 2). More effective prescription drugs and vaccines have transformed health care over the last several decades and many health problems have been prevented, cured, or managed effectively through the use of these agents.1 In some cases, the use of prescription medicines have kept people from more expensive options such as hospitalization and/or surgery.
Figure 1. Percent increases of Prescription Drugs, Hospital Care and Physicians (2010, Kaiser)
Figure 2. Health Care Costs (2010, Kaiser)
Total = $2.3 Trillion
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group.
The pharmaceutical industry is headed for a patent expiration cliff, as I pointed out last year (here). The NY Times wrote covered this problem recently (here). Pharmaceuticals make up a big part of our life. In 2007, 90% of seniors and 58% of non-elderly adults relied on a prescription medicine on a regular basis.2 While the public demands safe, effective drugs, the costs to bring these medications to market keep increasing. Development costs have soared according to a recent analysis by Tufts. Tuffs’ research showed a 64% increase in the cost to discover and bring a new drug (not a reformulation or recombination of an existing drug) to market from $802M in 2000 to $1,320M in 2006. The Pharmaceutical industry must recoup the R&D costs for drugs that make it to market, as well as those that do not. Only one in five drugs that enter the clinical testing process receive FDA approval and are brought to market.3 The pharmaceutical industry must reinvent itself, and I think personalized medicine will be part of its reinvention and the next wave to take the industry by storm.
Personalized medicine is about devising a treatment plan as individualized…
