Health Care Expenditures, Innovation, and Demographic Change

In the focus of the health care market analyses usually are increasing health care expenditures (HCE) and their future development. Considering these increasing HCE the price regulation measures are applied in the relevant pharmaceutical market to contain these increases. Some believe that HCE mainly rise due to medico-technical and pharmaceutical innovation and ageing. After reviewing international measures of price regulation, empirical studies examine the relation between innovation and ageing. The main conclusions are: the ageing effect causes rising expenditures on pharmaceuticals as well as increasing pharmaceutical innovations instrumented either as patent applications or new drug approvals; the research and development expenditures of the pharmaceutical industry lead to rising expenditures on pharmaceuticals but decreasing overall HCE; additionally, decreasing mortality is found to increase HCE. These results do not support the medicalisation hypothesis of a disproportional increase of HCE with rising share of elderly persons. Therefore, the overall impact of pharmaceutical progress on HCE is not straightforward. Consequently, predominating conclusions and political implications should be reconsidered.

In the focus of the health care market analyses usually are increasing health care expenditures (HCE) and their future development. Considering these increasing HCE the price regulation measures are applied in the relevant pharmaceutical market to contain these increases. Some believe that HCE mainly rise due to medico-technical and pharmaceutical innovation and ageing. After reviewing international measures of price regulation, empirical studies examine the relation between innovation and ageing. The main conclusions are: the ageing effect causes rising expenditures on pharmaceuticals as well as increasing pharmaceutical innovations instrumented either as patent applications or new drug approvals; the research and development expenditures of the pharmaceutical industry lead to rising expenditures on pharmaceuticals but decreasing overall HCE; additionally, decreasing mortality is found to increase HCE. These results do not support the medicalisation hypothesis of a disproportional increase of HCE with rising share of elderly persons. Therefore, the overall impact of pharmaceutical progress on HCE is not straightforward. Consequently, predominating conclusions and political implications should be reconsidered.