November 16, 2009
Drug Makers Raise Prices in Face of Health Care Reform
By DUFF WILSON
NY Times

Even as drug makers promise to support Washington’s health care overhaul
by shaving $8 billion a year off the nation’s drug costs after the
legislation takes effect, the industry has been raising its prices at
the fastest rate in years.

In the last year, the industry has raised the wholesale prices of
brand-name prescription drugs by about 9 percent, according to industry
analysts. That will add more than $10 billion to the nation’s drug bill,
which is on track to exceed $300 billion this year. By at least one
analysis, it is the highest annual rate of inflation for drug prices
since 1992.

The drug trend is distinctly at odds with the direction of the Consumer
Price Index, which has fallen by 1.3 percent in the last year.

Drug makers say they have valid business reasons for the price
increases. Critics say the industry is trying to establish a higher
price base before Congress passes legislation that tries to curb drug
spending in coming years.

“When we have major legislation anticipated, we see a run-up in price
increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical
economics at the University of Minnesota. He has analyzed drug pricing
for AARP, the advocacy group for seniors that supports the House health
care legislation that the drug industry opposes.

A Harvard health economist, Joseph P. Newhouse, said he found a similar
pattern of unusual price increases after Congress added drug benefits to
Medicare a few years ago, giving tens of millions of older Americans
federally subsidized drug insurance. Just as the program was taking
effect in 2006, the drug industry raised prices by the widest margin in
a half-dozen years.

“They try to maximize their profits,” Mr. Newhouse said.

(Bend over a little more...)

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