The prices of many drug products sold at the retail levelincreased more than the general rate of inflation in 1993 inspite of "voluntary" efforts by drug manufacturers to limitprice increases and the new economic environment in whichmanaged care is holding prices down. So concludes a reportreleased Monday by the majority staff of the U.S. SenateSpecial Committee on Aging, which is chaired by Sen. DavidPryor (D-Ark.).
Entitled "Drug Prices for Older Americans Still Increasing MuchFaster Than Inflation," the report said that reductions in druginflation have done little to help consumers, mostly olderAmericans on Medicare, who must pay for drugs out-of-pocket."Most disturbing about the data is that, over the past six years,manufacturers have increased retail prices the most on drugsthat are often taken by women, older Americans, epileptics,asthmatics, diabetics and people with thyroid conditions," Pryorstated.
Pryor had issued a challenge to drug companies to restrainretail prices in order "to determine if drug manufacturers wereserious about meaningful price restraints or if they were justinterested in scoring publicity points with Congress." Of 45companies queried by Pryor's committee, eight rejected theidea; 36, including Amgen Inc. and Immunex Corp., neverresponded; and only Genentech indicated an interest inrestraining prices.
The report claims that:
-- while the producer price index for drug prices dropped to3.1 percent in 1993, this was 15.5 times overall manufacturers'inflation, which was 0.2 percent, according to Bureau of LaborStatistics figures.
-- 40 of the top 200 drugs increased in price at the retail levelmore than twice the rate of general inflation, which was 2.7percent in 1993.
-- 18 large manufacturers that volunteered to restrain prices tothe level of inflation are limiting inflation for the weightedaverage of all sales. But the report says this penalizes thepatient who must pay for drugs out-of-pocket because the lowprices that the larger buyers -- such as HMOs -- can negotiatemore than offset inflationary price increases that retailcustomers must pay. Older Americans on Medicare are affecteddisproportionately because Medicare does not pay foroutpatient drugs, the report concludes.
Duke University economics professor Henry Grabowskicriticized many of the report's figures and conclusions. He toldBioWorld that the Bureau of Labor Statistics' figures formanufacturers' inflation are overstated in the case of drugsbecause they do not account for all new drugs, "which tend tohave lower price increases" than older ones. He added that thepharmaceutical industry's relative immunity to business cyclesmay also have accounted for the lower rate of inflation withinthe economy as a whole.
As for the relatively high price increases of 40 of the top 200drugs, Grabowski said it "sounds possible," adding that"probably another fifth of the drugs didn't go up at all or wentdown in price." He also cautioned that "before I would swear tothose numbers, I would want to look at the methodologycloser."
As for the relatively high inflation in the retail sector,Grabowski said, Pryor "is hitting a real phenomenon." However,he questioned its importance, commenting that "prices havecome down fairly dramatically in every sector."
-- David Holzman Washington Editor
(c) 1997 American Health Consultants. All rights reserved.