Raise in drug prices as reform draws closer

Rise in drug prices

Drug makers are leading something of a double life at the moment. On one hand, is the promise to support Washington's healthcare reform by cutting $8 billion off the nation's drug costs each year. On the other, the industry has been raising prices at its fastest rate in years.

According to analysts, the pharmaceutical industry have raised wholesale prices of brand-name drugs by roughly nine percent in the last year, thereby adding more than $10 billion to the nation's drug bill and putting it firmly on track to exceed $300 billion by the end of the year. This puts the annual rate of inflation for drug prices at its highest since 1992.

Validity

The drug makers, who have promised to cut the nation's yearly drugs bill once new legislation takes effect, argue that they have a valid reason for the price increases. However, cynics argue that the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in the coming years.

However, drug companies say they are having to raise prices to maintain the profits necessary to invest in the R&D of new drugs, especially as many patents are set to expire in the next few years. Particularly on many of their most popular drugs.

Ron Rogers, a spokesman for Merck, for instance, argues that "price adjustments have no connection to health-care reform." This comes despite the company raising its prices by about 8.9 percent in the last year.

Drug spending

What's more, as the drug industry has been actively opposing some of the cost-cutting provisions in the House legislation, drug makers have been proudly citing the agreement they reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year - $80 billion over 10 years - from the nation's drug bill by giving rebates to older Americans and the government. That provision is likely to be part of the legislation that will reach the Senate floor in coming weeks.

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