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Why Are Drug Costs Soaring?

When it comes to the nation's healthcare costs, a government report released tonight says yearly spending overall has hit a record $1.2 trillion. And the government predicts that prescription drug prices alone will rise more than 12.5% a year for the foreseeable future.

As for why drug costs are soaring and the search for solutions, correspondent Cynthia Bowers has the story.

Countless times every day Americans are urged to "ask your doctor" about one "brand name" drug or another. If it seems the ads are everywhere, that's because drug makers spend more than $2 billion a year to make sure you see them.

"Direct-to-consumer advertising is the drug companies' way of creating consumer demand for a product," says Steve Schondelmeyer of the University of Minnesota.

And it works. Just ask General Motors.

"People will walk in and say, 'I have a headache: I want Celebrex,' or 'I've got indigestion and I want Prilosec,'" says General Motor's James Cubbin.

With 1.25 million people covered under its health-care plan, GM shelled out $1 billion on prescription drugs last year alone: That amounts to $300 for every car it makes. And if that's not enough to give the automaker heartburn, consider that $52 million went to pay for one "heavily advertised" drug--Prilosec.

"We found that 92% of the people that had Prilosec, which is prescribed for a very severe stomach condition, had never had any other medication prescribed, had never undergone any treatment for a stomach condition," says Cubbin.

GM says ads are driving patients to ask for drugs they may not need, and there's evidence to suggest ads are effective. According to a recent survey by Prevention magazine, 91% of Americans have seen drugs ads, 32% have talked to their doctor about a specific brand-name drug, and 71% of those who asked for that drug, walked out with a prescription.

"Advertising for prescription drugs creates a unique dilemma in that it puts pressure on the normal decision maker--that is, the physician--to prescribe drugs that he or she may not otherwise prescribe," says Schondelmeyer.

Brand name drugs can carry a high price tag. A 1-month supply of the arthritis medication Celebrex can average around $80, and Prilosec can run upward of $100, but patients with medical coverage are often immune to sticker shock because insurance companies will often pick up most of the tab.

The pharmaceutical industry says the increase in profits is a side effect of prompting patients to see their physician.

"The more we can get information out to patients so they can think about new cures and new treatments that are available, the better off they are going to be and the better off our health care system is going to be," says industry spokesman Alan Holmer.

In addition to upping its health premiums, GM has mounted an ad campaign of its own, trying to sell its employees on 'generic' drugs as a way of keeping themselves and the company healthy.

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