The 6.1 per cent rate of growth over 2006 was the lowest since 1998, mostly because growth in spending on drugs slowed, the team at the Centers for Medicare and Medicaid Services found.

Cheaper generic drugs and worries about drug safety helped slow spending growth but the numbers kept the United States far ahead of all other countries on health spending.

Health spending represented 16.2 per cent of US gross domestic product, up slightly from 16 per cent in 2006, the researchers reported in the journal Health Affairs.

'Slower spending growth for prescription drugs was one of the major factors driving down overall healthcare spending growth in 2007,' Micah Hartman, a statistician at CMS who worked on the report, told reporters in a telephone briefing.

'In 2007, retail prescription drug spending increased 4.9 per cent to US$227.5 billion; this was a deceleration from 8.6 per cent growth in 2006,' the CMS team wrote.

Some of this loss hit drug companies.

Sanofi sleeping pill Ambien, Coreg, a heart failure drug made GlaxoSmithKline and Pfizer Inc's blood pressure drug Norvasc all lost patent exclusivity in 2006, making room for less expensive generics.

Generic drugs, which cost 30 per cent to 80 per cent less than brand names, accounted for 67 per cent of the market, up from 63 per cent in 2006.

Safety concerns
'Increased safety concerns for certain prescription drugs in 2007 also likely influenced the drug spending trend, as the Food and Drug Administration issued 68 'black box' warnings, compared to 58 in 2006 and 21 in 2003,' they wrote.

Mr Hartman said his team presumed there must be a link between these black box warnings - the strongest type of safety warning for prescription drugs - and the decline in drug use.

Medicare, the federal health insurance plan for the elderly, spent 19 per cent more on retail prescription drugs.

In 2007, 31 per cent of healthcare dollars went to hospitals, 21 per cent to physicians and clinics, 10 per cent to drugs and 25 per cent to other services such as dental and home health services.

Private insurance paid for 35 per cent of this, Medicare footed the bill for 19 per cent, Medicaid and the State Children's Health Insurance Program paid for 15 per cent, and 12 per cent came from out of pocket. Other sources included Department of Defense spending and philanthropy.

Hospital spending was US$696.5 billion, a 7.3 per cent increase, while doctor and clinical services spending was US$478.8 billion, up 6.5 per cent.

Medicare spent US$431.2 billion overall in 2007, up 7.2 per cent, while spending for Medicaid, the joint state-federal health plan for the poor and disabled, grew 6 per cent to US$329.4 billion. Much of the growth in Medicaid spending was in payments to hospitals, the report found.

'Private health insurance premiums increased 6 per cent to US$775 billion in 2007,' the report reads.

People spent US$268.6 billion out of their own pockets for healthcare, up 5.3 per cent from the year before.

Numbers could change this year, Hartman said, noting the recession that began in December 2007. 'This recession is already longer than any recession we have seen in the past 20 years,' he said. -- REUTERS