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Drug companies manipulate prices for profit
Key Excerpts from Article on Website of New York Times


New York Times, November 16, 2009
Posted: November 21st, 2009
http://www.nytimes.com/2009/11/16/business/16drugprices.html

Even as drug makers promise to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect, the industry has been raising its prices at the fastest rate in years. In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992. The drug trend is distinctly at odds with the direction of the Consumer Price Index, which has fallen by 1.3 percent in the last year. Critics say the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in coming years. “When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years. “They try to maximize their profits,” Mr. Newhouse said.

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