After slowing for six years, prescription drug spending increased to 8.5 percent in 2006, compared with 5.8 percent in 2005. "This increase is due to increased use, lower rebates, new indications for existing drugs, growth in several therapeutic classes and increased use of specialty drugs," Cowen said.
However, more use of generic drugs helped keep the growth in drug cost low, Cowen said. The 2006 growth rate was less than the average annual rate of 13.4 percent per year from 1995 to 2004, she said.
Other than Medicare and prescription drugs, there was a general slowdown in spending by hospitals, physicians and clinics. In addition, home health care, nursing home care and dental care all grew at slower rates in 2006 than in 2005, Cowen said.
The Medicare drug plan was also responsible for a decrease in the rate of out-of-pocket spending for health care, Cowen noted.
Dr. Sidney M. Wolfe, director of the Health Research Group of Public Citizen, said he thinks the significant increase in expenditures in the Medicare drug program was due to the law that prohibits the government from negotiating prices with the drug companies, as well as a great deal of waste in administering the program.
"If you have a segment of health care completely out of control as in prescription drug prices for Medicare -- it's a strong argument why there should have been price controls and negotiated prices," Wolfe said.
Wolfe said that both the U.S. Department of Defense and the U.S. Veterans Administration negotiated prices with drug companies. "The drug companies used their lobbyists to fight to the death against price controls because they knew they would make much less money if there were price controls," he said.
There are also massive administrative wastes in the Medicare program, Wolfe said. "They are somewhere between $350 and $400 billion a year thrown down the drain because
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