Express Scripts Holding Company (NASDAQ:ESRX)’ definition of wasteful spending included three categories. First, some patients use costly prescription drugs when less expensive but clinically comparable alternatives exist. Similarly, patients who don’t use home delivery and specialty pharmacies when appropriate can forego significant cost savings. Lastly, patients who fail to adhere to medication therapies rack up unnecessary medical expenses.
Here are the seven most wasteful states on a per capita basis for medication spending in 2012:
Source: Express Scripts
Common denominators
One thing that immediately jumps out is that all seven of the most wasteful states when it comes to medication spending are in the South.
These states have something in common other than geography, though. The Centers for Disease Control and Prevention conducts surveys routinely to determine the health status of Americans. All seven of the states identified by Express Scripts Holding Company (NASDAQ:ESRX) as most wasteful with regards to medication spending rank near the bottom in the CDC’s health status survey.
Source: Centers for Disease Control and Prevention
Several of the states also share another common denominator. All but Texas rank among the lowest states with regards to median household income.
Source: U.S. Census Bureau
The states that rank among the most wasteful when it comes to medication spending are highlighted in red on both charts — and there is plenty of red as you can see. So why would health status and household income levels impact medication spending waste?
Higher consumption of any product provides more opportunities for inadvertent waste. It stands to reason that states with fewer residents reporting good health would also have more residents taking prescription drugs. The more prescription drugs taken creates more potential for waste.
Linking household income to higher levels of wasteful medication spending is a little trickier. One possibility is that Americans with lower incomes don’t have access to the information that could help them make more cost-effective choices regarding prescription drugs. For example, many insurance companies provide information about generic drug alternatives online. However, if individuals don’t have Internet access, that information doesn’t help them.
Trash to treasure?
What difference do these factoids make for Motley Fool readers looking for investing ideas? I think these findings actually point to some good stocks to consider.
Total wasteful spending in 2012 amounted to around $418 billion. This means that there is great potential for reducing these costs. Companies that can help achieve this potential should do well in coming years.
