Drug firms accused of price gouging Prices go up at 4 times the inflation rate, report says

September 11, 1992|By Boston Globe

Prices of the 20 most popular prescription drugs jumped 80 percent on average from 1984 to 1991, four times the general inflation rate for the period, according to a report that accuses drug companies of profiteering.

"Companies making the top 20 prescription drugs are experiencing skyrocketing profits, and they are making those profits the new-fashioned way -- by price-gouging," says Ron Pollack, director of Families USA Foundation, an advocacy group in Washington.

As a result of uncontrolled price increases, says the report released yesterday, makers of the top 20 prescription drugs enjoyed average profit margins of more than 15 percent in 1991 -- nearly five times the Fortune 500 median.

The report was endorsed by the Democratic chairman and the ranking Republican member of the Senate Special Committee on Aging, both of whom are pressing for legislation to take away some of pharmaceutical companies' tax breaks if their prices outpace the general inflation rate. President Bush has strongly opposed the proposed bill.

"We all wonder when this industry will finally develop some compassion for the older Americans who so desperately need the medications they produce," says David Pryor, D-Ark., who heads the aging committee.

Sen. William S. Cohen, R-Maine, who co-sponsored the proposal to curb prescription drug prices, notes that the report documents repeated price increases for many of the most widely used drugs. "While Americans are digging deeper into their pockets to pay for medications, the drug companies are reaping huge profits at the expense of the consumer," Mr. Cohen says. "It's time for Congress to act."

Both Mr. Pryor and Mr. Cohen acknowledge, however, that no action on the prescription drug cost-containment bill is likely before the November elections.

The top 20 brand-name pharmaceuticals include drugs used to treat many common disorders, such as arthritis, heart disease, high blood pressure, ulcers, thyroid disease, anxiety and menopausal estrogen deficiency.

Prices of more than half the drugs were raised eight to 10 times during the six-year period. For instance, the price of Naprosyn, an arthritis drug, increased 10 times from 1985 to 1991, while the prices of the blood pressure drug Lopressor and the anti-clotting drug Persantine were raised nine times.

"There is nothing in terms of drug companies' expenses that warrants the size or frequency of these increases," Mr. Pollack said in an interview. "It reflects the fact that these companies know they have a captive market, they're in a monopoly situation and they can do essentially what they please."

Price increases for prescription drugs are burdensome for consumers, Mr. Pollack said, because insurance pays a much lower share of drug costs than for other medical expenses. People under age 65 pay an average of 57 percent of the cost of prescription drugs out of their own pocket, while those over 65 pay 64 percent out-of-pocket, according to the report.

The report, challenging industry claims, says nearly half the 10 percent annual increase was devoted to increases in marketing, profits and administrative expenses, not research and development costs.

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