Pharmaceuticals and Refernce Drug Pricing. This essay is about the health care costs and how to reduce them in the future.

Essay by nabhatiesUniversity, Bachelor'sA-, November 2006

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In light of ever-increasing amounts of capital spent on health care, vast amounts of research and debate have taken place across the world in an effort to stifle expenditures in the health industry. Health care costs in the industrialized nations have been on the rise every year since 1970, without interruption (Ioannides-Demos, Ibrahim & McNeil, 2002). A major source of the increases in health expenditures is drug-related; in Canada alone, drug costs were $1.1 billion in 1975 and $9.2 billion in 1994 (Lindsey & West, 1999). In British Columbia, money spent on pharmaceuticals overtook spending on physician services in the 1990s (Cassels, 2002). Drugs are the second largest expenditure next to funding for hospitals in B.C., and much dialogue has ensued on how to contain these costs. As a result, a bold new approach to containing drug costs was introduced by the British Columbia Ministry of Health: the Reference Drug Program (RDP) (Cassels, 2002).

Establishment of this program led to a backlash from the major transnational pharmaceutical companies, and the Reference Drug Program came to be the 'most thoroughly evaluated reference-pricing program in the world' (Cassels, 2002). Although the RDP has its skeptics and advocates, the program saves taxpayers $44 million every year (Lopez-Casasnovas & Puig-Junoy, 2000; Cassels, 2002).


Increases in healthcare expenses have been a common theme in almost all industrialized nations for the last 30 years: 'medical costs in Western Europe increased by an average of 4.1% each year between 1970 and 1990, exceeding the overall rate of economic growth during the same period which increased by 2.7% annually' (Ioannides-Demos et al., 2002). Many countries have tried several techniques in an effort to reduce these astronomical increases; most interventions have been directed towards medical technology - either rationing or restricting access to new medical technology, which...