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COPYRIGHT 2001 Thomson Financial Inc.
In the search for answers to the conundrum of rising health care costs, the idea of helping consumers by cutting drug manufacturers' profits is a red herring that could distract policymakers from more fruitful approaches, economists from across the political spectrum suggested at a March 28 meeting of the Council on the Economic Impact of Health System Change. While wishful thinking may suggest otherwise, drug companies' profits on average aren't excessive, constitute a very small portion of health care costs overall, and likely are key to continued development of new treatments, scholars said at the meeting held in Washington DC.
"While it may be fun to attack drug company profits, reducing or eliminating them won't do much to lower national health spending," said Princeton University Professor of Political Economy Uwe Reinhardt.
For starters, drug profits, and even the entire amount of U.S. spending for prescription drugs, don't constitute an especially large proportion of health costs, Reinhardt said. Total U.S. health spending in 1999 amounted to $1,210.7 billion, according to the Health Care Financing Administration. Of that, retail prescription drug spending amounted to $99.6 billion, 8.3 percent of national health expenditures or 1.07 percent of the gross domestic product.
About 75 percent of the retail drug revenue...
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