Pharmaceutical cost containment and innovation in the United States

In the United States, government has played a limited role in containing the costs of pharmaceuticals. There are no price controls, no national drug formularies, no universal cost-sharing policies, and perhaps most important, no national coverage of prescription drugs. Rather, pharmaceutical cost containment was historically left to private insurers and managed care companies, while consumers paid out of pocket for close to 62% of all drug expenditures. US utilization has historically been relatively low and prices by far the highest of the four industrialized countries. The major change in pharmaceutical cost containment in the 1990s has been the consolidation of purchaser power at the level of the insurer and managed care companies. These ‘whole sale’ purchasers now represent 70% of direct manufacturer sales, and they are demanding and receiving deeper price discounts. Meanwhile these same players are implementing formulary policies, utilization controls, and disease management programs, the outcomes of which have not yet been systematically evaluated. Failure to pass on savings to consumers, cost shifting by manufacturers to vulnerable consumer groups, and potential under-utilization of cost-effective drugs remain of concern.