Health-care spending slowed slightly in '07

WASHINGTON - Spending on health care slowed slightly in 2007 as consumers turned more to generic drugs instead of brand-names to fill their medicine cabinets, the government reported yesterday.

Although the cost of buying drugs, visiting the doctor, or going to the hospital continued to increase faster than the overall economy, the 6.1 percent growth rate for all health-care spending was the slowest since 1998. In 2006, spending increased 6.7 percent.

Officials worry that devoting more and more resources to health care makes it harder for families to meet other pressing priorities and for businesses to compete internationally.

Overall, Americans spent $2.2 trillion on health care, an average of $7,421 a person, for the year, according to the report by the Centers for Medicare and Medicaid Services.

About 67 percent of medications dispensed in 2007 were generic drugs - up from 63 percent the year before. Generics can cost as little as one-third the price of brand-names.

Several factors are helping to drive the increased use of generics. First, insurers are steering consumers to lower-priced medicines by charging low co-payments for certain drugs. Meanwhile, they charge higher co-payments for medicines they want consumers to avoid for safety and financial reasons.

Large retailers and grocers are encouraging consumers to buy generics by enticing them with low prices.

Several blockbuster brand-name drugs lost their patent exclusivity in 2006, generating competition from generics. Notable examples include Flonase, an allergy medicine; Zocor, a medicine used to lower cholesterol; and Zoloft, which is used to treat depression.

Federal officials said safety concerns also probably influenced the reduction in spending growth rate. The Food and Drug Administration issued more of its most serious warnings than in previous years - 68 in 2007 versus 58 the year before and 21 in 2003.

Another factor was a decrease in administrative expenses associated with the new Medicare drug benefit. The program kicked in during 2006, generating a substantial uptick in administrative expenses.

Officials emphasized that the good news about slowing the increasing costs of health care extended only to prescription drugs. All other major health sectors - such as costs for hospitals, physicians, nursing homes and home health - grew at the same rate as or slightly faster than the year before.

Since prescription drugs generate only about 10 percent of all health spending, officials question how much longer the transition to generics would dampen the growth in health-care costs.