Sharp Rx price jumps way up, says GAO

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A Government Accountability Office study found “extraordinary price increases” in 416 branded drug products (across 321 brands) between 2000 and 2008. That's about half of one percent of all branded drug products.

The term “branded drug products” encompasses different drug strengths and dosage forms of the same drug brands, and GAO defines “extraordinary price increases” as those of more than 100% at a single point in time.

The number of extraordinary price increases per year has more than doubled from 2000 to 2008, the GAO said, with most of those price increases ranging between 100% and 499%. The higher prices were sustained on nearly 90% of those products, with some seeing further price increases. More than half of those products were in three therapeutic classes – CNS, anti-infective and cardiovascular.

The report, prepared for Sens. Charles Schumer (D-NY) and Amy Klobuchar (D-MN), ascribed the increases to limited competition and a lack of therapeutically equivalent drugs due to patent protection and market exclusivity. The recent wave of corporate consolidations, the GAO said, may be further fueling the trend by reducing competition between branded drugs fielded by different companies.

The GAO's findings were based on changes in average wholesale price based on data from Thomson Reuters' Red Book.  

PhRMA took issue with the GAO's methodology, questioning the use of average wholesale price as representing not manufacturer prices but those of distributors. The trade group pointed to a sharp decline in retail prescription drug spending growth to make the case for drugs as one of the more cost-effective segments of healthcare spending.

“Pharmaceutical research companies make price adjustments independently as a result of market forces," said PhRMA SVP Ken Johnson, "which include everything from patent expirations to the huge, sunk R&D costs which typically exceed $1 billion for a single medicine, as well as the ability of powerful purchasers to obtain large savings, benefiting patients."

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