Executive Voices: An Op Ed Column

Healthcare Costs
Sure, medicine is more expensive these days, but it’s cheaper than the alternative


By Bob Ingram

Corporate executives are under scrutiny as never before when it comes to choosing the right investment for their business, their shareholders and their employees. One of the expenditure categories now causing great discussion and close review is healthcare spending for employees and retirees. We are clearly spending more on healthcare and on pharmaceuticals today than we did years ago. But in the debate over cost, we can too easily forget our employees or retirees and the value that pharmaceuticals bring to our own bottom line by enabling us to live longer, healthier, more productive lives.

One of the most dramatic examples of the value of pharmaceuticals can be found in the case of HIV/AIDS. In the early 90's, full-blown AIDS was a death sentence for patients. By 1996, AIDS was no longer one of the 10 leading causes of death in the United States. Survival rates improved because in 1984, scientists at Burroughs Wellcome discovered that AZT – the first treatment to fight HIV/AIDS – was active against the virus. In the first 16 months after the introduction of AZT, hospital inpatient care dropped 43 percent.

Today, prescribing several AIDS medicines at once to attack the disease can cost $16,000 a year per patient. But before such therapies were available, one AIDS patient could account for $100,000 a year in hospital bills -- until they died of the disease.

Are companies spending more today on AIDS medicines? Yes, but we are saving millions in the overall cost of medical care. And employees with AIDS are living – longer, healthier and more productive lives.

One indicator that we’re living longer and better lives can be found in statistics on nursing home admissions. In the 1950s, the average age of admission to a nursing home was 65. Today that age is closer to 81.

The very success of medicines in preserving life has in part led to the current controversy over cost. Contrary to popular perceptions, price increases by industry are not the problem: while the $122 billion we spent as a nation on medicines in 2000 represents an increase of 13.6 percent overall from 1999, according to IMS Health, drug spending increased 13.6 percent. Only 3.9 percent of that was due to price increases; 9.7 percent was due to increased utilization (volume, mix and new products). The most significant factor is volume growth; the number of patients needing medicines is rising dramatically. Thirty-five million Americans are now over age 65, and in just 30 years, that number will double to 70 million.

Accountants look at the increasing senior population and the rising drug bill, and they say budgets cannot afford this increased spending on pharmaceuticals. But those who silo their spending in columns on the balance sheet fail to realize that spending on prescription medicines is cost effective -- often offsetting much higher treatment costs in other budgetary columns.

For example, stroke was the No. 1 killer disease in America in the 1940s and 50s. Yet many people today are living long, productive lives, even with high blood pressure, thanks to beta-blockers and other medicines. A study by the Agency for Health Care Policy and Research says that greater use of a blood-thinning drug would prevent 40,000 strokes a year, saving $600 million per year.

Can our businesses afford increased spending on such medicines, particularly if they reduce patient suffering? Certainly. What our companies or our society cannot afford is the far greater cost of catastrophic care for heart disease, diabetes, Alzheimer’s and other illnesses among the burgeoning senior age group -- costs that will grow substantially as the population grows.

Consider diabetes. Right now, the United States is facing an epidemic of Type II diabetes. Over 17 million Americans have diabetes - the 6th leading cause of death by disease in the U.S. Another 16 million are estimated to have pre-diabetes, but most are not taking steps to avoid full onset.

Those people at-risk who adopt preventive lifestyles may avoid the need for medicines. But those who suffer with this chronic and progressive disease will not be so lucky; they face a future of fatigue, foot ulcers and gangrene leading to amputation, blindness, kidney failure, heart disease, stroke and premature death.

That is certainly frightening for patients. But what will really frighten those responsible for paying for the treatment of diabetes is the alarming rise in the number of patients -- and therefore costs -- expected over the next 50 years. By 2050, at current rates, the number of patients with Type II diabetes will increase by 200 percent. Today, this nation pays $100 billion a year to cover the human and economic cost to society from just this one disease -- a huge proportion of which is spent for hospital care. Considering the aging population, the increasing incidence of diabetes, and the huge cost associated with it, the national health care bank will be broken by just one disease.

That is what our society cannot afford. The solution is greater investment in education to prevent diabetes, increased spending on existing medicines to delay and control the disease’s effects, and continued research and development of newer and better treatments against this disease.

Now and in the future, using the right medicines can lead to dramatic improvements in health and decreases in overall health care spending. That future is being built now with the help of a pharmaceutical industry focused on discovering and developing innovative medicines for improved patient health.

That's the true cost – and value - of medicines.


Robert Ingram is COO and president of Pharmaceutical Operations of GlaxoSmithKline in Research Triangle Park.

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