Healthy Skepticism Library item: 16906

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Publication type: news

Wilson D
Rising Prices of Drugs Lead to Call for Inquiry
The New York Times 2009 Nov 18
http://www.nytimes.com/2009/11/19/health/policy/19drugs.html

Full text:

Democrats in Congress asked for two separate investigations of drug industry pricing Wednesday as they continue working on legislation to overhaul the nation’s health care system.

Responding to news reports of unusually high wholesale price increases in brand-name prescription drugs, four House leaders and one senator asked for government reviews of the pricing practices.

Although drug makers challenge the theory, some experts say the run-up in wholesale prices may be partly related to the industry’s concerns about future cost containment under any health care legislation.

“Recent studies have indicated that the industry may be artificially raising prices for certain pharmaceutical products in expectation of new reforms,” the House Democrats wrote in a letter to the Government Accountability Office, a nonpartisan investigative arm of Congress. “Any price gouging is unacceptable, but anticipatory price gouging is especially offensive,” the letter added, asking the G.A.O. to conduct an expedited review of the price increases.

The House letter was signed by four representatives who have been active in the health care legislation: Charles B. Rangel of New York, chairman of the Ways and Means Committee; Henry A. Waxman of California, chairman of the Energy and Commerce Committee; and Pete Stark of California, and John Lewis of Georgia, chairmen of two Ways and Means subcommittees.

Separately, Senator Bill Nelson of Florida, a Democrat who has led efforts in the Senate to seek more concessions from drug makers, wrote to the inspector general of the Department of Health and Human Services asking for “an immediate and thorough investigation into drug industry pricing and recent increases, and the extent to which these increases may affect the Medicare and Medicaid programs.”

Both letters cited a New York Times article on Monday reporting that wholesale prices of brand-name drugs rose about 9 percent in the 12 months that ended Sept. 30, the highest increase in years – even as the Consumer Price Index was declining during the same 12-month period.

The Times article cited a Wall Street analyst’s calculations; a study sponsored by the AARP, the advocacy group for older Americans; and a report by IMS Health, a consulting firm to the drug industry.

The price increases could add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year.

At that rate, the increases would more than offset at least the first year of savings that the drug industry has agreed to make under a provision of the health care bill that was approved by the Senate Finance Committee and has been incorporated into the full Senate bill introduced on Wednesday. That measure calls for the industry to come up with discounts and rebates that would save Medicare recipients and the government $8 billion a year for 10 years.

“I want to know if there’s a back-door move under way by the drug makers to recover some of the concessions they’ve promised for health care reform,” Senator Nelson said in a statement Wednesday.

Drug companies do not deny having raised wholesale prices at the highest rate in years. But they say it has nothing to do with the impending health care legislation. They say the price increases are necessary to maintain profits for research and employment in the face of a difficult business environment, which includes a slowdown in sales of many brand-name products, expiring patents and increasing competition from generic drugs.

The wholesale prices of brand-name drugs most commonly used by Medicare recipients rose in the latest 12-month period at the fastest rate since at least 1992, according to Stephen W. Schondelmeyer, a pricing expert working with AARP.

Separately, a study by the investment bank Credit Suisse found that prices for all drugs from the eight largest United States pharmaceutical companies had risen, on average, at the highest rate in at least five years.

And IMS Health said there were higher-than-expected price increases this year.

Mr. Schondelmeyer, professor of pharmaceutical economics at the University of Minnesota, and Catherine J. Arnold, a senior drug industry analyst for Credit Suisse, have said they believe that part of the reason for the price increases was to get ahead of possible cost containment measures in health care reform.

Professor Schondelmeyer and Joseph P. Newhouse, a Harvard health economist, said there were precedents for drug price increases before government actions affecting the industry.

The House Democrats also said the G.A.O. had previously found unusual price increases in some prescription drugs in the year before Congress added drug benefits to Medicare.

The House letter on Wednesday said that the G.A.O. could build on that work.

The House members are also asking the G.A.O. to submit a proposal to continuously monitor prescription drug prices. The House health care bill already includes a provision authorizing Medicare to negotiate directly with manufacturers – a proposal hotly opposed by the industry.

Ken Johnson, an official with the drug industry’s trade association, said in a statement that calls for an investigation were “based on misleading use of statistics and sensationalized media reports.”

Mr. Johnson, senior vice president for the Pharmaceutical Manufacturers and Research Association, did not deny any of the specific findings of AARP, Credit Suisse and IMS Health reports, which were based on data supplied by manufacturers and wholesalers. But he said other measurements of drug price increases show they have risen substantially less than 9 percent.

Mr. Johnson accused AARP of “trying to muddy the waters for its own political gain as we enter the homestretch of the health care reform debate.”

An AARP executive vice president, John Rother, said in a statement: “This isn’t about politics. It’s about affordable health care.”