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Retail Rx is helping do what Washington won’t

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Actuaries at the Centers for Medicare and Medicaid Services have released their annual look at trends in U.S. health care spending. Published in the journal Health Affairs, the report contains a few bright spots, but the overall picture remains bleak.

Total expenditures on health care increased 4.6% in 2018 to reach $3.6 trillion. While the growth rate was a fraction of a percentage point higher than the previous year (the increase was attributed largely to the reinstatement of a tax associated with the Affordable Care Act that was temporarily suspended by Congress), it was still well below 2018’s 5.4% increase in gross domestic product. As a result, health care’s share of the economy fell — from 17.9% two years ago to 17.7%.

Welcome as it is, the decline in that ratio doesn’t change the fact that health care spending in this country now stands at $11,172 per person, twice the level, on average, of other advanced nations, according to the Organization for Economic Cooperation and Development. The ongoing disparity in how resources are allocated causes the U.S. to underinvest in education, infrastructure and social services, putting it at a disadvantage in the global economy.

The CMS actuaries also found that prescription drug spending at retail grew 2.5% in 2018, to $335 billion, up from 1.4% a year earlier. It is important to note, however, that pharmaceutical prices, which actually fell 1%, were not to blame. Higher spending was instead driven by such factors as the mix of medications used.

The findings point to two opportunities for retail pharmacy operators. Despite the frequent hue and cry about the cost of prescription drugs, spending in the sector is currently increasing at a slower rate than other parts of the health care system, and accounts for just 9% of the total. Pharmacies and their partners in the pharmaceutical industry need to do a better job explaining the value proposition of the products and services they provide, and highlight prescription drugs’ ability to make other, more costly, forms of health care unnecessary.

In addition, pharmacies are beginning to play an important part in addressing the problem of total health care costs. As the new store formats recently deployed by CVS Health and Walmart show, shifting care, whenever appropriate, to a low-cost, community-based setting can be effective for patients and efficient for payers. Pharmacy operators and other companies in the private sector should be commended for trying to cut the Gordian knot in health care at a time when policy makers in Washington don’t have much to offer.


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