US prices of widely-used brand-name drugs increased by an average of 8.3% a year from 2006 to first-quarter 2010, compared with a 2.6% annual drop in the prices of generics during the period and a 3.8% average annual increase in the consumer price index for medical goods and services, says a new government report.
Taken together, the "usual and customary" (U&C) prices for a basket of 100 commonly-used drugs (55 brand-name and 45 generics) increased by an annual average of 6.6% during the period, according to the study, which was conducted by Congressional watchdog body the Government Accountability Office (GAO).
The GAO was asked by Congress to examine recent trends in prescription drug prices following reports in the media which suggested that, during the debate leading up to passage of President Barack Obama's Patient Protection and Affordable Care Act (PPACA) in March 2010, US prescription drug prices may have experienced greater increases than in other recent years. Using data from the Blue Cross Blue Shield Federal Employee Program (BCBS FEP) which covers almost 5 million people, the Office looked at pricing trends for the 55 brand-name and 45 generic drugs, and also examined another basket of 100 commonly-used drugs based on their active ingredient, to assess the growing national shift in consumer utilisation from branded to generic versions of medicines.
While there was a great deal of overlap (at least 95%) between this latter basket and the initial 100 commonly-used drugs examined by the GAO, the study found that prices for the 100 which were selected by active ingredient had gone up only about 2.6% a year, a much lower rate of increase that the 6.6% reported when shifts in utilisation were not included.
Commenting on the report, Pharmaceutical Research and Manufacturers of America (PhRMA) chief executive John Castellani said its key finding was that drug prices have been increasing at an annual rate of 2.6%, which is lower than overall medical inflation.
Any analysis of prices must take into account the mix of brand and generic medicines that patients actually use, and nearly 80% of all US prescriptions now are filled with generics, he pointed out. "Reports that ignore this fact exaggerate drug price trends and miss the point that it is the innovators' investments that lead to pioneering advances that improve patient care and, over time, it is the innovators' investments in new brand medicines that lead to generic copies that are broadly used by patients at low cost for many years," said Mr Castellani.
Moreover, he added, similar research conducted by economists at the Massachusetts Institute of Technology (MIT) and IMS Health shows that average prices for top-selling medicines have been declining and also indicates that attempting to evaluate pricing trends for brand-name drugs in isolation "is a flawed approach that produces highly distorted results."
IMS has reported that US spending for prescription drugs has been growing at historically low rates, rising an average of 5% a year from 2004 to 2009, and is expected to increase just 3.5% annually from 2009 to 2013, he added.
"Too often, medicines are viewed as a cost and not as a saving, even though medicines often reduce unnecessary hospitalisations, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases," said Mr Castellani.
• In 2009, prescription drug spending in the US totaled approximately $250 billion, of which $78 billion - around 31% - was spent by the federal government, notes the GAO.