Pharmaceutical Companies Continue To Raise Prescription Drug Prices Despite Presidential Candidates’ Criticism of Industry

The prices of brand-name medications have continued to increase despite calls from all three major presidential candidates for pharmaceutical companies to make their products more affordable, the Wall Street Journal reports. Wholesale prices for the 50 brand-name medications with the most sales increased by an average of 7.82% in 2007, compared with increases of 6.73% and 6.22% in the previous two years, according to Delta Marketing Dynamics. The overall U.S. economy had an inflation rate of 4.1% in 2007.

In some cases, pharmaceutical companies have increased the prices of brand-name medications scheduled to lose patent protection to prompt patients to switch to similar, newer products that will have patent protection for a number of years. William Little, president of Delta, said, "Companies are under great pressure to deliver revenue, and it's becoming increasingly difficult to do so as generics displace profitable brands."

However, such price increases could "backfire politically, pushing policies toward greater government power over price negotiations," according to the Journal. Presidential candidates Sens. John McCain (R-Ariz.), Barack Obama (D-Ill.) and Hillary Rodham Clinton (D-N.Y.) have criticized pharmaceutical companies over the high prices of the products and have announced proposals to address the issue.

McCain has said that he supports the legalization of prescription drug reimportation from Canada to reduce costs and "keep competition vigorous," and Obama on his Web site promises to "prevent (drug) companies from abusing their monopoly power through unjustified price increases." In addition, Clinton and Obama both have said that they support proposals to allow the federal government to negotiate prices directly with pharmaceutical companies under the Medicare prescription drug benefit.

According to some analysts, pharmaceutical companies have increased the prices of brand-name medications to "protect their margins in case the Medicare effort and others like it succeed," the Journal reports.

Comments
Jeff Nelligan, a spokesperson for CMS, said, "Allowing the government to negotiate drug prices would not generate additional savings" under the Medicare prescription drug benefit because the program "relies on health plans and their related pharmacy benefit managers to negotiate deep discounts with manufacturers."

Officials for the Pharmaceutical Research and Manufacturers of America said that the prices of brand-name medications "are determined by market transactions, and health plans are able to negotiate for discounts," adding that Medicare and Medicaid beneficiaries "have benefited from our competitive market approach."

Raymond James analyst John Ransom said, "Direct negotiations clearly could save the feds money, the concept being that the government makes almost 50% of purchases, and accordingly have almost fiat-like power to set their purchase price wherever they wish" (Won Tesoriero, Wall Street Journal, 2/21).