Of note, the CBO recently updated its methodology for calculating the cost of Medicare policies to reflect the effect of prescription medicines on total medical costs. For the first time, the CBO will begin to account for the savings from use of medicines that reduce the need for other costly medical services, such as hospitalizations. The new methodology will incorporate a 0.2 percent decrease in spending on medical services for every 1 percent increase in the number of prescriptions. For the first time, prescription medicines are distinguished with a broad certification of achieving savings on other Medicare costs.
CBO noted that in the majority of cases, “pharmaceuticals have the effect of improving or maintaining an individual’s health,” citing the growing body of evidence that demonstrates the cost benefits of improving access to medications. For example, according to a study published in the Journal of the American Medical Association, the implementation of the Medicare prescription drug benefit, also known as Part D, was followed by a $1,200 per year decrease in nondrug medical spending among those who previously had limited or no prescription drug coverage.
Take diabetes as an example. If uncontrolled, diabetes can lead to many complications, including amputations, kidney failure, heart attack and stroke. Each of these complications comes with a cost. The average cost of amputation surgery is nearly $40,000. A single year of dialysis for kidney failure patients costs $83,000. However, a year’s supply of medicines that help control a patient’s diabetes typically averages $2,400. Similarly, patients with heart failure are among the most expensive to treat in the entire health care system due to the high costs associated with hospitalizations, surgeries, and emergency room visits. Consistent use of medicines can reduce those healthcare costs by approximately $9,000. Medicines that control hypertension, for example, can reduce the risk of congestive heart failure by up to 50 percent, resulting in even greater savings.
Of course, the dollars and cents are only part of the story. Across the spectrum of diseases, medications have had a tremendous impact on quality and length of life. The Centers for Disease Control and Prevention attributes the use of new drugs and expanded uses of existing drugs among the primary factors that have driven the death rate down by 60 percent over the last 75 years. For example, thanks to innovative medicines, HIV/AIDS is now a treatable, chronic condition, with death rates down nearly 80% since 1995.
Let’s look at one more set of numbers. The Alzheimer’s Association predicts that by 2030, there will be 7.8 million Americans with Alzheimer’s. The total cost of care for these patients will be approximately $400 bilion in 2030. But the Association also reports that if we can delay the onset of Alzheimer’s by five years, our country can save approximately $170 billion in care costs per year by 2030. These numbers and CBO’s math should guide the policy and business environments that foster innovation, which is the key to fight Alzheimer’s and other costly and heart-breaking diseases.
The change by CBO illustrates how prescription medicines are the innovation that can offset other health care costs. As policymakers consider the future of Medicare, it will be critical to recognize the value of medicines and their offsetting effect on other medical spending. Otherwise, short-term policies designed to produce quick savings could result in unintended consequences. Those consequences are likely to be increased costs borne by taxpayers today and by future generations. But perhaps even more importantly, poorer health outcomes would jeopardize the health and quality of life for many Americans. With this in mind, policymakers should take a fresh look at what the numbers reveal.
Castellani is president & CEO, PhRMA.