Prescription Drugs Drive up Health Care

April 25, 2002 ( - The biggest contributor to last year's whopping 13.7% increase in health care costs in the US, was prescription drugs, a study by PricewaterhouseCoopers shows.

The increases in the costs of drugs, coupled with the costs of medical technology and advances in diagnostics and treatment rose 3% overall, though these advance may lead to future savings by reducing hospitalizations and related health care services, the study noted.

According to the study, other contributors to the increase in health care costs were:

  • a 2.5% rise in expenses at hospitals, which are negotiating higher payments from health plans
  • a 2.5% rise in general consumer inflation
  • a 2% increase in expenses from government mandates and regulation
  • a 2% increase in costs due to increased consumer demand for services
  • a 1% uptick in litigation expenses
  • the cost of fraud, which was up 0.7%.

On Demand

PricewaterhouseCoopers cited the following reasons for the increase in consumer demand for medical services:

  • the aging of the population
  • greater media coverage of new treatments
  • increased attention to prevention and diagnostics
  • the move away from less-expensive managed care.

At the same time, the report notes, litigation expenses, malpractice insurance premiums, and government-mandated benefit costs are increasing.

The study was commissioned by the American Association of Health Plans.