Hefty drug price hikes

While the consumer price index has fallen 1.3 percent in the last year, the drug industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent.

Although drug makers say they have valid reasons for the increases, critics say they are trying to establish a higher price base before Congress passes health-care legislation that includes curbs on drug spending.

A health economist at Harvard University found a similar pattern after Congress added drug benefits to Medicare several years ago.

Another economist, who analyzed drug prices for AARP, said, "When we have major legislation anticipated, we see a run-up in price increases." He said the average cost of a brand-name prescription drug taken daily would be more than $2,000, $200 higher than last year.

The higher prices will make it easier for the drug industry to fulfill the agreement it reached with the White House and the Senate Finance Committee to trim $8 billion a year from the nation's drug bill, which will likely top $300 billion this year.

The industry's trade association had claimed that it could not afford to give up more than $80 billion over 10 years. It cited a study by its consulting firm that predicted drug sales might decline this year, but the firm has since revised its projections and forecasts growth of at least 4.5 percent in 2009, $21 billion more than it expected six months earlier.

The hefty price increases and the industry's own prognoses should prompt the Obama administration and senators to rethink the $80 billion deal.

Containing costs is crucial to effective health-care reform. Since the drug industry is hiking the prices consumers must pay, it should sweeten the rebates it promised.