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Rx Increases: The Price is Wrong?

By Clive Riddle, April 17, 2009

If there was a pharmaceutical version of the CBS game show The Price Is Right, you might not fare well after you were told to “come on down.” Your guesses might not hit the mark given the recent round of increases throughout the prescription drug industry.

The Wall Street Journal this week ran a story by Barbara Martinez and Avery Johnson, “Drug Makers, Hospitals Raise Prices,” in which they noted “the prices of a dozen top-selling drugs increased by double digits in the first quarter from a year earlier” illustrated by the following increases using Credit Suisse data:

  • Bristol-Myers Squibb Sprycel (Luekemia) up 32.7%,
  • Pfizer Sutent (Kidney Cancer) up 14.3%.
  • Pfizer Viagra (Erectile-dysfunction) up 20.7%
  • Eli Lilly Cialis (Erectile-dysfunction) up 14.2%.
  • Eli Lilly Strattera (ADHD) up 15.6%

Credit Suisse data by pharmaceutical company included:

  • Johnson & Johnson averaged 10.0% increases
  • Pfizer averaged 9.9% increases
  • Eli Lilly averaged 7.9% increases

The Journal cites Express Scripts claims experience of 10 – 15% price increases on brand products over the past year, and quotes Credit Suisse's Catherine Arnold: “I don't think I have ever seen anything quite like this," as she attributes the increases to positioning higher prices before the government starts demanding greater discounts.

Also this week, AARP released their annual “Rx Watchdog Report”, a 71 page study on Trends in Manufacturer Prices of Prescription Drugs Used by Medicare Beneficiaries. They found these prices increased 8.7% during the past year, while increases during the past six years ranged between 5.3% and 7.4%. Prices increased for all but 7 of the 219 brand name drugs included in the study.

Meanwhile, AARP found that prices for the 185 generic drugs most widely used by Medicare beneficiaries fell 10.6% on average, during the past year. Maybe “The Price Is Right” needs to start featuring generic products.

Reader Comments (1)

Price-Price- Price- As noted the spiral is upward. Unfortunately, as with all other things in life these are going up also. The pharma industry has a business model that unfortunately needs significant changes to remain viable. As with all economics, the buyer and seller both need satisfaction for a continued relationship. With today’s pricing for new drugs, the relationship between buyer and seller is troubled. Although pharma may attempt to justify the prices, there remains a fundamental change that needs to take place or the market will move to seek value by other means. The confidence in pharma has been degraded with multiple instances of indiscretions from studies to pricing scandals continue. Trust being lost is a serious issue to be regained by pharma. Factually, the utilization of step edits, tier structures, co-pay levels and exclusionary formularies would not have to exist if it were not for the irrational pricing shown by many pharma manufactures. Managed care would not have developed if the model of healthcare did not take on a demand crushing pricing stand several years ago. The rule of unintended consequences remains as does cause and effect.

April 25, 2009 | Unregistered CommenterTom Kaye

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