Who's to blame for drug prices?

May 1, 2005

Depends on whom you ask. Ask the Pharmaceutical Research and Manufacturers of America (PhRMA), and you'll hear that prices aren't really that high-no higher, at any rate, than prices for other components of health care. In support of that assertion, the industry's lobbying organization points to data from the Consumer Price Index showing that

Depends on whom you ask. Ask the Pharmaceutical Research and Manufacturers of America (PhRMA), and you'll hear that prices aren't really that high-no higher, at any rate, than prices for other components of health care. In support of that assertion, the industry's lobbying organization points to data from the Consumer Price Index showing that prescription drug prices are rising about 4% a year-an increase that is slightly lower than the increase in the cost of medical care overall.

Ask the American Association of Retired Persons (AARP) the same question, however, and you get quite a different answer. When the organization that represents Americans older than 50 years looked at the wholesale price of brand and generic prescription drugs most used by their older membership, it found an average 7.1% increase between 2003 and 2004. Apples and oranges, says PhRMA: The AARP study does not reflect actual prices charged to consumers because wholesale drug prices don't reflect discounts offered by pharmaceutical companies or lower prices negotiated by insurers and other purchasers.

What's more, according to a study that PhRMA commissioned from the consulting firm of Guiliani Partners (yes, the Rudolph Guiliani who was once mayor of New York City), attempts to circumvent higher US drug prices by importing drugs from countries where prices are lower are unacceptably risky. Safety and security risks, the study asserts, "far outweigh any alleged benefits for US residents." The report goes on to say: "It is not difficult to imagine a scenario in which terrorist groups could use this system to finance their operations or, worse, as a vehicle of attack."