US drugmakers have reacted with fury to two separate calls by Members of Congress for official inquiries into allegations of industry “price gouging” in anticipation of health care reform.
Leaders of two powerful House committees have asked the Government Accountability Office (GAO) for “an expedited report on recent trends in prescription drug pricing” and a proposal for monitoring pricing practices, after recent studies and a report in the New York Times suggested that drugmakers may be artificially raising prices ahead of the health reform legislation now going through both houses of Congress and which could adversely affect drug price growth.
New analyses suggest that brand-name drug prices rose more than 9% last year and over 35% since 2006, say Democratic Representatives Charles Ranger, Henry Waxman, Pete Stark and John Lewis, in their letter to the GAO. “These price increases cannot be explained by increases in the Consumer Price Index (CPI), which fell last year. Pharmaceutical manufacturers used the same tactic before the start of Medicare Part D, raising drug prices dramatically in anticipation of gaining millions of new insured customers,” add the legislators, who lead the House Committees on Ways and Means, and Energy and Commerce.
And in the Senate, Democrat Bill Nelson of Florida has written to the Inspector General of the Department of Health and Human Services (HHS) requesting “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 programmes.”
“I want to know if there's a back-door move under way by the drugmakers to recover some of the concessions they’ve promised for health care reform,” he said.
The legislators’ demands follow the publication of a report last week by the seniors’ group AARP which claims that manufacturer prices for widely-used branded drugs have increased 9.3% since October 2008, considerably higher than the average 5.8%-8.3% of the past seven years, and against a 1.3% decline in the CPI. 96% of brand-name drugs’ prices have gone up in the last year, it adds.
“The pharmaceutical industry should be embarrassed when it sees its own price increases put side-by-side with the general inflation rate. Even as the cost of most goods and services drops, a person taking just one brand name drug now pays $200 more per year than a year ago,” said AARP executive vice president John Rother.
The NYT article quoted both the AARP study and new research by Credit Suisse analyst Catherine Arnold, who reports that the list prices of drugs made by the USA’s eight biggest drugmakers rose 8.7% on average during the 12 months ending September 30.
These price increases will add more than $10 billion to the US drug bill, which is forecast to surpass $300 billion this year, and at least one analysis puts this as the highest annual rate of drug price inflation since 1992, says the NYT.
The Pharmaceutical Research and Manufacturers of America has fired off a number of angry responses these claims, accusing the AARP of “trying to muddy the waters for its own political gain” and of having “a skewed view of the world in which medicines are always looked at as a cost and never seen as a saving.”
“It’s pretty obvious that the calls to hold hearings or involve GAO are based on the misleading use of statistics and sensationalised media reports,” says PhRMA executive vice president Ken Johnson. In fact, he adds, the CPI shows prescription drug prices grew 2.7% in the 12 months to September, not 5.4% as cited by AARP, while prices posted on medicare.gov shows that average annual growth for the products identified by the Association as top-selling was 3.3% over the last three years, less than half the 7.4% annual average cited by AARP.
The group’s conclusions are based on incomplete information because they do not take account of discounts and rebates which can significantly lower the cost of many brand-name drugs, benefiting patients nationwide, “but you wouldn’t know it by looking at pharmacy prices – or reading the New York Times,” he says. The newspaper article “only tells half a story, using selected statistics to make a flawed assumption that an increase in drug prices must somehow be tied to health care reform.”
“Here’s the real truth: financial results for nearly a dozen of our companies show zero revenue growth in the third quarter and -3% year to date. And it doesn’t appear to get much better down the road,” says Mr Johnson.
By Lynne Taylor