Report: Prices of some drugs have doubled

Consolidation, repackaging of some medications may be behind increase

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updated 4:53 p.m. ET, Mon., Jan. 11, 2010
WASHINGTON - Prices on a growing number of prescription medications have ballooned in recent years as consolidation in the drug industry leaves fewer companies manufacturing niche medications.

Congressional investigators say the number of extraordinary price hikes on drugs doubled between 2000 and 2008. The drugs affected are mostly specialty medications but also include some popular products like Bayer's antibiotic Cipro and the Eli Lilly schizophrenia treatment Zyprexa.

The Government Accountability Office report issued Monday attributed the rise to a combination of factors, including industry consolidation and price hikes by third-party providers who repackage drugs for patients.

The GAO's findings could put new pressure on drugmakers to contribute billions more to the health care reform effort being finalized by Congressional Democrats.

The drug industry originally pledged $80 billion to defray the costs of covering millions more Americans, but the package being negotiated between the House and Senate is expected to call for well over $100 billion in financing from drug companies.

GAO found more than 400 examples of unusual price jumps on brand name drugs during the eight-year period — most ranged from 100 to 499 percent, but several exceeded 1,000 percent.

But congressional investigators acknowledged that drugmakers often aren't to blame for the steep increases. More than half of the price hikes cited in the GAO report came from suppliers who repackage drugs for use by patients, according to the report.

Repackagers can include HMOs, pharmacies and stand-alone companies.

"Proponents of repackaged drugs believe that they offer convenience to patients and may reduce medication errors," states the report. "However, some experts suggest that repackaging drugs may unnecessarily increase drug prices and profits."

In other cases, GAO said there simply isn't enough competition to drive prices down for certain niche medicines. The group said consolidation in the drug industry means large drugmakers have bought up entire groups of similar drugs, allowing them to charge higher prices.

The Pharmaceutical Research and Manufacturers of America said the drugs cited by GAO represent a fraction of the overall pharmaceutical market. The group pointed to a government report issued last year showing total drug prices grew just 3.2 percent in 2008, the lowest pace in 50 years as use of low-cost generic drugs increased.

The GAO's report was requested by Sen. Charles Schumer, D-N.Y., vice chairman of the Joint Economic Committee.

"It is hard to find a good-faith explanation for why drug prices could go up this much," Schumer said in a statement.

At the request of Senate Democrats, the Department of Health and Human Services' inspector general plans to investigate whether drug companies are raising prices of prescription drugs ahead of passage of the health care overhaul plan.

The drug industry lobby says the requested investigation is based on misleading data.