Publication

This paper discusses reasons why the Medicare drug benefit plan has cost considerably less than expected. While there are undoubtedly many factors underlying the slower than projected increase in drug costs, the author argues that the main factor is a decline in the pace of innovation. With fewer important new drugs being developed and patents expiring on many important existing drugs, it should not have been surprising that the increase in drug expenditures would slow. However even with lower than projected costs, the US still is spending far more per person on prescription drugs than other wealthy countries.