House Democrats Not Happy with the Rise In Brand-Name Drug Prices

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House Democrats accused the pharmaceutical industry Tuesday December 8, 2009 of increasing brand-name drug prices while agreeing to discount those higher-priced drugs to Medicare patients if a health care bill passes.

They are complaining about price gouging and questioning whether drug companies are reneging on a pledge to provide billions of savings as part of a U.S. health-care overhaul that President Barack Obama is working on to make medical expenses affordable to Americans.

In the USA, prescription drugs account for about 10% of health-care spending. The concern is that it appears that prices are increasing rapidly, Rep. Frank Pallone (D., N.J.), chair of the House Energy and Commerce Committee's health subcommittee, said at a hearing Tuesday. A recent AARP study shows people are paying 9% more for brand-name drugs, according to Rep. Henry Waxman (D., Calif.), the Energy and Commerce Committee chair.

Waxman called the increase “shocking” and said it would boost drug company revenues by $20 billion this year. This is not what industries promised. In fact, they promised to provide $80 billion of savings over 10 years as part of a broader U.S. health-care overhaul.

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"When Americans hear about these soaring drug prices, they are absolutely right to demand to know what Congress is doing about it," said Waxman. Panel member Rep. Jane Harman (D., Calif.) called the price increases "unconscionable and immoral," while other Democrats on the panel questioned whether rising prices support lucrative pay packages for drug company executives.

Even though generic drug prices have declined from September 2008 to September 2009, big brand-name drugs rose 9.3% in the same period, according to the AARP study and many of its members are feeling the pinch of rising drug prices.

“It is hard to escape the conclusion that the industry is positioning the pricing of its products for enactment of the new health reform legislation," Rep. Henry Waxman, D-Calif., said at a hearing on the issue.

There were no brand-name drug prices that fell in 2009 and the increase last year was higher than any in the last seven years, Stephen Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota, told the House panel.

Critics questioned the AARP study, which looked at more than 500 drugs, including 219 brand-name products accounting for nearly 82% of prescription-drug expenses. The study hasn't been peer reviewed and the findings are misleading because they rely on wholesale prices, not retail prices. Drug industry officials also questioned the accuracy of results that don't factor in rebate and discount programs.

Bonnie M. Cramer, Chair of AARP’s Board of Directors “As the health care debate moves forward, AARP will continue to work with Congress to ensure that every American has access to affordable prescription drugs. With millions of Americans, young and old, depending on the benefits of prescription drugs to improve their health and well-being, it’s time to make these drugs even more effective by making them affordable.”

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