[Ip-health] GAO report on "extraordinary" drug price increases

[Aidan Hollis]

The GAO has released a report on "extraordinary" increases in the prices of=
 certain drugs:

"Between 2000 and 2008, 416 brand-name drug products representing 321 drug =
brands had extraordinary price increases. Most often, these extraordinary p=
rice increases ranged from 100 percent to 499 percent, but in a few cases w=
ere 1,000 percent or more.

>From 2000 to 2008, 416 brand-name drug products representing 321 drug brand=
s had an extraordinary price increase. A number of these 321 drug brands ha=
d two or more extraordinary price increases between 2000 and 2008. The numb=
er of brand-name drug products that had these extraordinary price increases=
 each year trended upwards, more than doubling from 2000 to 2008; however, =
they represent about half of 1 percent of all brand-name drug products.  Mo=
st brand-name drug products that had an extraordinary price increase sustai=
ned the new price after the extraordinary price increase occurred."

http://graphics8.nytimes.com/packages/pdf/business/20100111-price.pdf

Another way of viewing this is that an increasing number of companies are r=
ecognizing that they have been underpricing their drugs. Given the upward t=
rend in prices of new drugs, re-pricing of older drugs should also be expec=
ted.

The government should be asking -- what is the mechanism that we can rely o=
n to control drug pricing in an environment with widespread insurance?

Aidan Hollis
Professor of Economics

University of Calgary, 2500 University Dr NW Calgary AB T2N 1N4 Canada
tel: +1 403 220 5861  fax: +1 403 220 5861
email: ahollis@ucalgary.ca
web: http://econ.ucalgary.ca/hollis.htm

Incentives for Global Health
http://www.healthimpactfund.org