Monday, March 10, 2008

Drug Prices Rise 7% For Drugs Most Commonly Prescribed For Seniors--Two-and-A-Half Times the Rate of Overall Inflation

Many health care experts point to the creation of Medicare as the time that the American health care system's costs began to explode at an unsustainable rate. Simply, they believe that a huge infusion of government money drove both the supply and the demand for services setting the stage for today's cost problems.

That has made many wonder what impact the new Medicare Part D drug benefit, which began in 2006, would have on drug prices.

That's why last week's news that drug prices for the brand-name medications most often prescribed for seniors increased by an average of 7.4% in 2007--two-and-a-half times the rate of basic inflation--caught my eye.

In the study, the senior group, AARP, tracked the wholesale drug prices for 220 different drugs. The prices increased for all but four.

In the four years prior to the advent of Part D, wholesale drug prices increased between 5.3% and 6.6% annually.

The pharmaceutical industry countered that overall drug prices have only increased by 3.7% since 2000. But that number includes the price of generic drugs that make up about half of all drug purchases.

While prices didn't spike much past prior trends, the 7.4% increase is disconcerting.

Will Part D have the kind of inflationary effect on drug prices that Medicare has been thought to have on overall health care costs?

Why did name-brand drug prices rise by a multiple of two-and-a half-times the rate of inflation in the first place?
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