By Mark Huffman
ConsumerAffairs.com
December 7, 2009
The rate of inflation is hovering near zero, but the price of prescription drugs seems to keep going up. Some lawmakers in Washington think they're rising too fast and want to know why.
The House Energy and Commerce Subcommittee on Health will hold hearings Tuesday to examine this key aspect of health care inflation.
Consumer groups and pharmaceutical companies have long had a difference of opinion about whether drug prices were actually going up faster than inflation. Consumer groups say including low cost generics in the mix makes the average appear lower than it actually is.
Last month the New York Times reported that drug makers have been busy raising prices for the most common prescribed medicines, in anticipation of possible health care reform. The newspaper quoted industry analysts as saying that within the last 12 months, drug makers have raised the wholesale prices of brand-name prescription drugs by about 9 percent. At that rate, that could add more than $10 billion to the nation's drug bill, which could be more than $300 billion this 2009.
Members of Congress aren't just concerned about the cost to consumers, but also the cost of the federal deficit. The increased cost to Medicare and other government health programs threatens to make an already awful deficit even worse.
"When we have major legislation anticipated, we see a run-up in price increases," Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota told the Times.
Industry, critics to testify
Schondelmeyer, who also analyzed drug pricing for AARP, has been called as a witness in Tuesday's hearing. Invited to testify with Schondelmeyer are Kathleen Stoll, Deputy Executive Director, Families USA, Bonnie Cramer, Board Chair, AARP, and Professor John Vernon, Department of Health Policy and Management, The University of North Carolina at Chapel Hill, and Faculty Research Fellow, the National Bureau of Economic Research.
The committee has also called Rick Smith. Senior Vice President for Policy, Research, and Strategic Planning, PhRMA, a pharmaceutical industry trade group. Smith has a decidedly different point of view than the one expressed in the Times article.
"Contrary to AARP's claims, the government's Consumer Price Index shows prescription drug prices grew by 2.7 percent during the 12-month period ending in September," Smith said. "That's half of the 5.4 percent cited by AARP and completely in line with current medical inflation, which grew to 3 percent during the period. Clearly, AARP has been trying to muddy the waters - for its own political gain - as we enter the homestretch of the health care reform debate."
Smith said nearly a dozen drug companies show zero revenue growth in the third quarter and -3 percent year to date, with an uncertain outlook for the future.
