Drug Companies Raising Prices in Anticipation of Healthcare Reform Bill
Drug makers are rushing to raise prices on brand name drugs before a healthcare reform bill is passed.
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.
"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.
Drug makers claim that they have valid reasons to raise prices and that it has nothing to do with the proposed healthcare reform bill. They say that many of their biggest patents for brand name drugs will expire in a few years and that they must increase prices to maintain profitability. This is pretty much the same thing the credit card industry is doing; right now credit card companies are raising rates and fees before the credit card reform bill takes effect.
