Patients throughout the world have benefited from health related research and development. Over the past three decades hospitalization rates have dropped dramatically, life expectancy has increased and the quality of life of patients has improved because of increased knowledge about illness and disease and because of the development of new treatments and technologies. Pharmaceutical innovation has played an important role in improving health outcomes.

Despite the remarkable progress of health related R&D, many countries have removed the incentives for health care innovation through the imposition of pharmaceutical price controls.

According to a recent study by the Center for Health System Change, employer-based health insurance premiums increased by 15 percent last year. In fact, health insurance premiums would have been higher if employers had not passed on more costs to consumers through co-payments and higher deductibles.

The increase in health insurance premiums is the largest increase in the past decade and far exceeds the 9.6 percent increase in health spending.

Patients respond differently to medications, therefore choices among drug treatments are important because physicians can determine what treatments are best for individual patients. Older patients, in particular, may react differently to medications because of frailty, differences in organ function or the co-existence of a number of medical conditions. Product alternatives allow physicians to tailor treatment to individual patient needs.

Nearly half of all Medicaid expenditure on prescription drugs is for Medicaid beneficiaries who are also eligible for Medicare (dual beneficiaries). A Commonwealth Fund study estimates that dual beneficiaries accounted for $16 billion or nearly half of the estimated $ 33 billion in Medicaid spending on prescription drugs in 2002. The state share of drug spending on dual eligible beneficiaries is estimated to be $7 billion.