Overall, a $1 increase in prescription drug spending is associated with a $2.06 reduction in Medicare spending.
Here is the paper. I’m all for the view that the Bush Administration has been fiscally irresponsible, but I never thought the prescription drug bill was the ideal target. If there is one category Medicare should be supporting, it is prescription drugs.
On a related note, Robin Hanson believes that half of all medical care spending is a waste (do read the whole thing). I’m not sure what mechanism will get rid of the bad half, but Robin’s claim deserves to be taken very seriously.