More people are using prescription drugs at a younger age, for more conditions, and for longer periods of time. An aging population and more complicated medical conditions fuel an increase in drug expenditures. Between 1995 and 1998, drug expenditures in the United States more than doubled. In 2001, Americans paid $208 billion for prescription drugs, double the amount that was spent in 1996. Some 20 percent of employers’ health care dollars are spent on drugs. Medicare beneficiaries spent an average of $813 in out-of-pocket expenditures on prescription drugs in 2000 and $1,051 in 2002. An estimated 45 percent of those 85 years or older have no prescription drug coverage. The increasing cost of drug usage is painfully evident to consumers, many of whom are forced to choose between medicine and food because many patients without prescription drug coverage cannot afford to spend several hundred dollars each month on needed drugs. The inability of many senior citizens to pay for needed drugs has entered the political arena as a campaign issue. Both political parties have drafted bills to provide such coverage. Congress has also considered a proposal that would make it easier for Americans to import prescription drugs from Canada, where drug prices are lower than in the United States. The pharmaceutical industry continues to spend massive amounts of money in an attempt to derail or limit such legislation.

To further stimulate demand for expensive drugs, pharmaceutical companies spend astronomical amounts on “direct-to-consumer” advertising. Spending on such advertising rose to $2.8 billion in 2001, up 35 percent from $1.8 billion in 1999. Drug advertisements are a powerful voice in the American health care scene. The nightly network news appears to be largely funded by advertising for drugs for the treatment of acid reflux (Nexium and Prevacid), osteoarthritis (Celebrex and Vioxx), allergies (Clarinex), osteoporosis (Fosamax), high cholesterol (Zocor and Lipitor), anemia accompanying chemotherapy (Procrit), bladder control (Detril), and high blood pressure and stroke (Altace). The number of prescriptions for the 50 top drugs most heavily advertised to patients grew at a rate six times that of other drugs.

Of some concern is the fact that two-thirds of the new drugs approved from 1989 to 2000 were modified versions of existing drugs that the FDA has determined do not provide significant benefits over those already on the market. Some companies seem more interested in “gaming” the system to extend their exclusive marketing rights on existing drugs by strategies such as slightly altering the formula just as the drug’s patent is expiring. Intense marketing by the pharmaceutical companies has promoted the sale of reformulated drugs such as Nexium (a modification of Prilosec), Clarinex (a modification of Claritin), and Sarafem (a modification of Prozac). In some cases, brand-name drug manufacturers have entered into collusive agreements that provide payments to generic drug manufacturers to keep generic equivalents off the market. As the pharmaceutical companies transform themselves into marketing companies, more expensive drugs with no clear advantage to patients are promoted over existing cheaper alternatives.

It is not surprising that the pharmaceutical industry, whose profit margins surpass those of almost every other economic sector in terms of return on revenue, assets, and shareholders’ equity, is opposed to any form of price controls. The high price of drugs in the United States is subsidizing sales abroad because most other countries have imposed price or profit controls on the sale of drugs. Many residents in border states such as Maine, Vermont, and California routinely travel to Canada and Mexico to purchase drugs. To protect themselves, consumers should question whether they

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