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Recent Increases in Drug Prices Arouse Suspicion of Democratic Lawmakers

By Alex Wayne, CQ Staff

November 18, 2009 -- House Democrats have ordered an investigation into recent price increases by drug manufacturers, out of suspicion that the increases are an attempt to maximize profits ahead of potential price controls included in a health care overhaul.

AARP, the interest group for Americans age 50 and older, reported this week that drug companies raised prices for brand-name products 9.3 percent since October 2008, despite a 0.3 percent reduction in the Consumer Price Index, the standard measure of inflation.

Drug prices rose 8.7 percent in 2008, and at rates ranging from 5.3 percent to 7.4 percent since 2002, AARP said. General inflation averaged about 2.8 percent per year between 2002 and 2008.

Henry A. Waxman of California, chairman of the Energy and Commerce Committee, and Charles B. Rangel of New York, chairman of the Ways and Means Committee, wrote Nov. 17 to the Government Accountability Office (GAO), Congress' chief investigatory agency, asking for a report into the price increases "on an expedited basis." The letter was released Wednesday.

The drug industry, Waxman and Rangel wrote, "has been monitoring this legislation closely, and recent studies have indicated that the industry may be artificially raising prices for certain pharmaceutical products in expectation of new reforms that could otherwise reduce prescription drug prices or price growth by encouraging patients and the government to be more efficient purchasers.

"Any price gouging is unacceptable, but anticipatory price gouging is especially offensive."

The letter was also signed by the heads of two Ways and Means subcommittees, Health Chairman Pete Stark, D-Calif., and Oversight Chairman John Lewis, D-Ga.

A spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA) did not immediately respond to a request for comment. But in a statement issued in response to AARP's report, the trade association's senior vice president, Ken Johnson, cited government studies showing slower growth in prescription drug prices than AARP reported.

Johnson also said that AARP ignored the larger effect medicines can have on health care costs.

"In AARP's skewed view of the world, medicines are always looked at as a cost and never seen as a savings—even though medicines often reduce unnecessary hospitalizations, help avoid costly medical procedures, and increase productivity through better prevention and management of chronic diseases," Johnson said.

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