A friend with a bad tooth ache recently found himself running to a New York drugstore in the middle of the night. He didn’t have a doctor’s prescription and anyway his health plan just covered the basics, not the extremely expensive dental care, so he browsed among the dozens of pills, syrups and painkiller creams lining the aisles until he found something to relieve his discomfort.
This situation is incredibly common in the US: people spend a lot of money on medical drugs, since 70 percent of them are either without a primary care physician or not utilizing one.
However, things are slightly changing. For the first time since 1970, medical costs went down a seasonally adjusted 0.1% in May, according to the Labor Department Index for medical care (that includes individuals’ outlays for insurance, medical supplies, doctor visits and hospital stays). The biggest factor in that decline was a 0.6 percent decrease in prescription drug costs.
As the Wall Street Journal puts it, “The last time medical costs posted a monthly decline, the patent on the modern MRI machine was a year old and the first test-tube baby was three years from being born. That was 1975.”
What is happening? Many drug patents are expiring and cheaper generic versions are reaching the market. Also, the Affordable Care Act that passed in 2010 is aimed to help citizens save money.
However, consumers shouldn’t get overexcited, a PwC health cost survey says, because they will still be spending a high percentage of their wages on medicine. “The projected 6.5% medical inflation rate in 2014 continues to outpace growth in personal income and overall inflation,” the survey points out. Other factors will definitely continue to push costs higher: for example, it’s true that there are new cheaper generic drugs, but also companies are coming out with an increasing number of high-priced specialty alternatives.