Is therapeutic innovation responsible for the increase in drug expenditure?

Abstract

Two years running, the drug consumption neither relates to the same pharmaceuticals nor those bought in the same proportions. The result of this is that the consumption structure changes and involves usually an increase in the average price of a drug, even without any rising of individual prices. This evolution is conventionally explained by marketing of new drugs for which therapeutic contribution involves higher prices. This article aims to demonstrate that such a approach is insufficient to explain what is called a structural effect. On the one hand, demographic and socio-cultural factors must be taken in account because they have a long-term influence on the level and on the composition of the drug demand. On the other hand, the drastic transformation of any markets, stirred up by a few drugs, cannot be understood if we only consider innovation and quality. As they come up to a latent demand, which could not be fulfilled before, new drugs create a "need effect", the results of which may be very strong on the consumption structure, as shown by some examples. To apprehend accurately the "structure effect", supply and demand have to be taken into account. Using the French example, which can easily be transposed to most Western economies, this article presents all the short-term and long-term factors which contribute to the development of the structural effect, and gives its value.