(Historically, drug prices have spiraled down after introduction*, but - partisan politics aside - during the "Republican decade B.C." {before Clinton}, as a purchaser of drugs for use in healthcare institutions, I expected individual drug price increases at mid-year and year’s-end. The "adjustments" were so predictable that buying-in surplus inventory ahead of advances became a business practice, and a twelve-month, fixed-price guarantee was tantamount to a double-digit product discount. Déjà vu?)

Surprise, Surprise! The national media is now reporting that "After years of restraint, drug makers are pushing up US prices on some of their most important medicines." For instance, it is stated that Lipitor - the world’s most prescribed drug - has gone up 11%, and Premarin, a brand-name drug that has been on the market for more than 50 years despite its questionable value, has gone up 17%. In the same time frame, Merck’s Singulair has gone up 11%.** (Actually by my calculations, these drugs’ wholesale prices increased by16%, 27%, and 16%, respectively, in less than 12 months.) These are expensive drugs, and these and other product price increases add up to a lot of dollars moving from US consumers’ pockets to the coffers of the multinational and foreign drug manufacturers!

During most of the 1990’s, inflation in the price of existing drugs contributed little to benefit cost creep. Healthcare cost increases attributable to prescriptions were caused by greater drug utilization and expensive new medications. What caused that end-of-the-20^th century price stability? Threats of government intervention during the Clinton presidency made manufacturers "pull in their horns", promising to keep their prices at or below inflation rates established by the consumer price index.

Today, after spending tens of millions of dollars to "buy" a more favorable US political climate, drug manufacturers feel it is safe to recoup and cash in on their investment. These recent percentage increases are multiples of the rate of inflation, and they certainly do not bode well for US purchasers of pharmaceuticals. For instance, already struggling employee benefit plans must absorb most of the increased costs, and the growing number of uninsured US consumers – especially seniors whose drugs are a primary target of these increases – absorb 100% of the cost increases or do without.

Drug manufacturers’ profits are notoriously excessive –like J & J’s first quarter 2003 net profit increase of 13% - so one must wonder if there are reasons other than simple greed for these rapid price bumps. One ulterior motive might focus on the anticipated funded Medicare Prescription Benefit. By building in higher prices in advance, the effects of any government-demanded discounts would be defrayed significantly, and after all, excessive medications costs attributable to insured Medicare recipients would be "transparent and painless", since they would be passed on to, subsidized by and spread across the entire US taxpaying citizenry – who would pay twice because of their status as Medicare tax contributors and as cash-paying consumers. (The multinational drug cartel wins again.)

Don’t expect a lot of help from generics. Although they are historically less-costly alternatives to equivalent brands, reduced competition due to mergers and acquisitions of generic manufacturers and suppliers has caused "…a number of generic products go up as high as 100% to 200%". (I have seen increases greater than 1000% - ten times the cost!) Also, these integrated, coordinated, and sometimes incestuous manufacturing/distribution relationships have resulted in discontinued production of traditional low-cost generics – leaving only the much higher-priced brand name equivalents available in the US.

Here comes another big drug cost shift to Americans! The rest of the world does not seem to feel the US consumer’s pain. Major trading partners’ anticipated 2003 price increases did not occur; therefore, any increases to US citizens directly importing their personal drugs have been due to the declining value of the US dollar against other currencies – unpalatable, but relatively insignificant. There is little wonder that more and more beleaguered US consumers and employee benefits plans are having to "look north" for relief – and it appears that they have of necessity fixed their gaze beyond Washington, D.C.!

**Some statistics and commentary are attributable to Scott Hensley, in the Wall Street Journal, 4/23/2003.