[Ip-health] U.S. top-selling branded drug price rose by an average of 7.82% in 2007

[robert weissman]

[snip]

In some instances, drug makers are raising prices on medications that
are due to lose patent protection so that customers will switch to --
and continue to buy -- similar, newer products that enjoy market
exclusivity well into the future.

It's a tactic that pharmaceutical companies use "to shift patients to
next-generation drugs by making old ones so expensive," says Michael
Krensavage, a drug-industry analyst with Raymond James & Associates. For
example, Sanofi raised Ambien's price ahead of its loss of patent
protection last year so that it was more expensive than Ambien CR, a new
formulation, to encourage patients to switch to Ambien CR, which will be
patent-protected for several more years.

[snip]

http://online.wsj.com/article/SB120355185318681367.html?mod=googlenews_wsj

Drug Prices Surge
Despite Criticisms
On Campaign Trail
By HEATHER WON TESORIERO
February 21, 2008; Page B1

The pharmaceutical industry has been a frequent target in the current
presidential campaign, but that hasn't stopped it from continuing to
aggressively raise the prices of prescription drugs.

Pharmaceutical companies increased wholesale prices for the 50
top-selling branded drugs by an average of 7.82% in 2007, after
increases of 6.73% and 6.22% in the previous two years, according to
Delta Marketing Dynamics Inc., a health-care marketing research company.
The most recent increase is almost double the overall U.S. economy's
4.1% annual inflation rate last year.

Some individual drugs had double-digit price increases over three years.
GlaxoSmithKline PLC raised the price of antidepressant Wellbutrin XL by
44.5% from 2005 to 2007. Sanofi-Aventis SA raised the price of sleep
drug Ambien 70.1%. Shire PLC increased the price of its
attention-deficit disorder medication, Adderall XR, by 33.5%, while the
price of cholesterol-fighting Lipitor -- the world's top-selling drug,
which brought in roughly $13 billion last year for Pfizer Inc. -- rose 16%.

Drug makers are trying to keep revenues afloat by raising prices ahead
of many drug-patent expirations and the possibility of changing
government regulations, part of the presidential candidates' agendas.
But aggressive price increases could backfire politically, pushing
policies toward greater government power over price negotiations.

In some instances, drug makers are raising prices on medications that
are due to lose patent protection so that customers will switch to --
and continue to buy -- similar, newer products that enjoy market
exclusivity well into the future.

It's a tactic that pharmaceutical companies use "to shift patients to
next-generation drugs by making old ones so expensive," says Michael
Krensavage, a drug-industry analyst with Raymond James & Associates. For
example, Sanofi raised Ambien's price ahead of its loss of patent
protection last year so that it was more expensive than Ambien CR, a new
formulation, to encourage patients to switch to Ambien CR, which will be
patent-protected for several more years.

The Delta Marketing figures represent the wholesale acquisition cost,
which is the manufacturers' list price for a drug; it doesn't reflect
underlying rebates and discounts given to wholesalers and large
purchasers, such as health insurers and pharmacy-benefit managers. While
the wholesale list price isn't what most customers pay, raising it may
help boost the starting point for negotiating a final price.

Through 2012, drugs that generate a total $67 billion of annual revenue
will lose patent protection and rapidly lose sales to cheaper generic
versions, according to Bernstein Research. Pharmaceutical
research-and-development operations haven't been able to produce enough
new drugs to replace those going off patent.

"Companies are under great pressure to deliver revenue, and it's
becoming increasingly difficult to do so as generics displace profitable
brands," says William R. Little, president of Delta Marketing of East
Syracuse, N.Y. Amid weak pipelines for new drugs, "I think drug
companies, by and large, are in a survival mode."

The pharmaceutical industry is already a target of criticism in the
presidential campaign, even among its traditional Republican allies.
Arizona Sen. John McCain, the likely Republican nominee, and Sens.
Barack Obama and Hillary Clinton, who are vying for the Democratic
nomination, have highlighted the fact that Americans pay more for
individual drugs than any other country's citizens. On his Web site, Mr.
Obama says he "will prevent [drug] companies from abusing their monopoly
power through unjustified price increases."

Mr. McCain's health-care plan includes a provision to "develop safety
protocols that permit reimportation to keep competition vigorous."
Reimportation refers to allowing drugs exported to other countries to be
brought back into the U.S. market to circumvent pharmaceutical
companies' high U.S. prices. The industry has been a staunch opponent of
reimportation, citing safety risks that could arise from drugs that
wouldn't undergo rigorous U.S. regulatory and border scrutiny.

Sens. Clinton and Obama, meanwhile, have endorsed giving the federal
government, which currently is excluded by law from directly negotiating
with drug makers, the power to negotiate prices for the Medicare Part D
drug benefit.

Some industry analysts suggest the drug companies are raising prices to
protect their margins in case the Medicare effort and others like it
succeed. The theory is that negotiations between the industry and
government would start at a higher price point.

Bush administration health officials and industry analysts disagree
about whether direct negotiations with drug makers would lower prices.

"Allowing the government to negotiate drug prices would not generate
additional savings under Medicare Part D," says Jeff Nelligan, spokesman
for the federal Centers for Medicare and Medicaid Services. "The
legislation creating Part D relies on health plans and their related
pharmacy-benefit managers to negotiate deep discounts with manufacturers."

"Direct negotiations clearly could save the feds money, the concept
being that the government makes almost 50% of purchases, and accordingly
have almost fiat-like power to set their purchase price wherever they
wish," says John Ransom, health-care equity analyst at Raymond James &
Associates. "I'd argue that if the exclusionary clause were lifted,
government would be in a position to effectively dictate price."

Trade group Pharmaceutical Research and Manufacturers of America says,
"Pharmaceutical prices in America today are determined by market
transactions and health plans are able to negotiate for discounts. ...
Clearly, Medicare patients and the Medicare drug-coverage program have
benefited from our competitive market approach."

The companies whose drugs had some of the steepest increases in recent
years defend their price tags. The average price increases of Glaxo
drugs in percentage terms were "below the consumer-price index for the
years 2005-07," says Glaxo. Sanofi says it "makes every effort to price
our products competitively relative to the value that they provide to
patients." Pfizer says, "Over the past decade, Pfizer has a
well-established history of moderate pricing versus competitors in the
U.S. market, particularly when you consider that the vast majority of
our customers receive some type of legislated or negotiated discount off
our announced list prices." Shire, the maker of Adderall, declined to
comment.

According to Anthony A. Barrueta, vice president of government relations
at Kaiser Foundation Health Plan Inc., branded drugs account for less
than 20% of the large insurer's prescriptions but more than 85% of its
drug costs.

As drug prices increase, patients feel the sting in their co-payments.
"You've got this insidious effect on the consumer side, where you're
paying a higher and higher proportion of the drug cost," says
drug-industry consultant Richard Evans.

Jim McNulty of Burrillville, R.I., has seen his monthly co-payments for
Wellbutrin rise to $45 today from $10 when he started taking the
antidepressant for bipolar disorder about a decade ago. Mr. McNulty, a
57-year-old mental-health advocate and former president of the National
Alliance on Mental Illness, takes 11 medications -- nine of them
available in generic form -- and pays $247 a month in co-payments.

He was on a generic form of Wellbutrin, which carried a $10 co-pay, but
had a bad reaction to it and went back to the brand. Still, he says,
"Whenever drugs go generic, I always give them a try."