Congress Eyes Review of Rapidly Rising Drug Costs

Congress will likely resume looking into the issue of rapidly rising drug costs following release of a Government Accountability Office (GAO) report that prices of more than 400 brand name drugs increased by at least 100% between 2000 and 2008. These 416 brand name drug products represented 321 different drug brands.

More than half of the brand name drug products that had large price increases were in three therapeutic classes: central nervous system, anti infective, and cardiovascular. These therapeutic classes include drugs used to treat conditions, such as fungal or viral infections, and heart disease.

Almost half of the price increases were for brand name drug products purchased from drug manufacturers or wholesalers, repackaged, and resold in smaller packages to healthcare providers. In 2008, the prices for 71 drug products increased by 100%, but in 2000, only 28 drug product prices increased by that amount.

However, some drug repackagers serve a niche in the drug market—claiming a small share of the market in a therapeutic class. Some of the higher price increases were for drugs priced less than $25 per unit. A full course of treatment for some of these drugs could total several thousand dollars, GAO said.

Based on interviews with experts and industry representatives, a lack of therapeutically equivalent drugs—both generics and other brand name drugs used to treat the same condition—plus limited competition may contribute to the high price increases. Also, the limited availability of therapeutically equivalent drugs may result from patent protection and market exclusivity, along with the size of the market for a given drug.

"It is hard to find a good faith explanation for price increases that are this severe, said Sen. Charles Schumer (D-NY), who along with Sen. Amy Klobuchar (D-MN), had requested the GAO investigation following a 1998 hearing. "This report will lead to a strong demand for action by Congress. We should make sure Medicare is allowed to negotiate drug prices in the final version of the healthcare bill."

Pharmaceutical Research and Manufacturers of America Senior Vice President Ken Johnson said in a statement that the GAO report focused "only on a small number of selected brand medicines rather than the entire prescription drug market." When looking at recently released national healthcare spending data for 2008, a sharp decline in retail prescription drug spending growth occurred—"leaving medicines as one of the slower growing areas of healthcare expenditures," he said.

Last month, Health and Human Services Inspector General Daniel Levinson agreed to a request from Sen. Bill Nelson (D-FL) to look into charges that 96% of wholesale prices of brand name prescription drugs were sharply increased in anticipation of healthcare reform. The investigation will look at how high prices are impacting Medicare and Medicaid.