GAO Seeks Price Spike Explanation

The Government Accountability Office (GAO) released a report detailing the correlation between increases in drug pricing and decreased competition. Released during the holidays, the report attempts to explain how 416 brand name drugs saw price spikes upwards of 499 percent from 2000 and 2008.

Additionally, 90 percent of the drugs that saw a pricing increase stayed at that level or increased even further in 2008. Blame is being cast on the lack of generics competition and the specialized nature of some of the treatments.

The report, sent to Sen. Charles Schumer (D-NY) and Sen. Amy Klobuchar (D-MN), explains how drug exclusivity is a necessary evil that allows drug companies to recoup high costs related to research and development.

However, “extraordinary price increases for brand-name drugs can lead to substantially higher drug spending for public and private insurance plans, hospitals, and other providers that cover prescription drugs,” the report stated. “Patients may also face higher out-of-pocket costs and reduced access to medically necessary and sometimes life-saving drugs. In addition, extraordinary price increases for brand-name drugs may contribute to overall drug spending, which has increased an average of about 10 percent a year since 2000.”

Interestingly, more than half of the drugs with extremely high price tags were from three therapeutic categories-CNS, anti-infective agents, and cardiovascular drugs. Most of the extraordinary price increases-a whopping 96 percent-were for drugs that cost less than $25 per unit.

The pharma companies interviewed for the report did have valid reasons for some of the price spikes, including changes in supply and/or demand, difficulties manufacturing certain treatments, and adjustments in price to compete with similar drugs.