Pharmaceutical spending varies geographically

The New England Journal of Medicine has examined geographical variation in Medicare drug spending, an area the authors said previous analyses hadn’t addressed. They used data from Medicare Part D and adjusted for local cost variations and other factors. You can find their nifty maps here and here.

Eileen Beal, the AHCJ member who suggested this report, reminds us that “While the report is specifically focused on Medicare spending, since that’s a major indicator of/for drug spending in general the report is probably going to be good background and resource material for AHCJ members covering healthcare cost/delivery.”

Their main findings, as summarized from the report:

  • Pharmaceuticals account for more than 20 percent of total Medicare spending, and drug spending “varies substantially among hospital-referral regions, with the highest-spending region spending 60 percent more per beneficiary on pharmaceuticals than the lowest. This variation is driven by variation in both the drugs prescribed and the number of prescriptions filled each month, with physicians in higher-spending areas prescribing both more drugs and more expensive drugs.”
  • It does not, however, vary as much as other medical spending. This difference, though, isn’t enough to really lower the total spending variation, even when drugs are taken into account.
  • “Pharmaceutical spending and medical (nondrug) spending are only weakly correlated across hospital-referral regions.”

And, the conclusion:

Thus, areas with high medical spending do not have offsetting lower pharmaceutical spending; in fact, if the coding practices in different regions are not too dissimilar, the substantial variation in pharmaceutical spending does not seem to be strongly associated with variations in medical spending at all.

Beal says she learned about the report from the Public Policy & Aging e-newsletter.

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