DRUG COSTS: Impacting Overall Inflation Rate
A "record" 10.7% surge in wholesale prescription drug prices in May contributed to a 0.2% monthly increase in the federal Producer Price Index, according to Labor Department figures released Friday. USA Today reports that "[w]ithout the drug increase, the May PPI increase overall would have been nil" (Grant, 6/15). The prescription-drug category of "minor tranquilizers" rose 585% in May, pushing the PPI into a "second monthly increase after five consecutive months of declining prices" (Simons/Sharpe, Wall Street Journal, 6/15). The Labor Department "declined to name the drugs involved," although Pittsburgh-based Mylan Laboratories Inc. "confirmed it recently raised prices on some of its generic tranquilizers." "We have no immediate plans to increase prices again on those same products," said Mylan Labs Vice President Roger Foster (Bloomberg News/Baltimore Sun, 6/14).
One Explanation
Analysts "suspect" that Mylan's price increase in its antianxiety drug lorazepam, "to $64.31 for 100 five-milligram tablets, from $16.95," contributed to the overall increase in tranquilizer prices. Foster said that his company "was forced to raise prices" because of stricter regulatory changes by the Food and Drug Administration and because there was "so little profit in the lorazepam market." According to USA Today, "analysts say that prices were raised on all minor tranquilizers largely because of higher costs for advertising and for research and development." Higher drug costs in general also reflect "the willingness of health care organizations to spend more on prescription drugs" to keep other costs down, said Sanford C. Bernstein analyst Terrence Norchi (6/15).
To Worry Or Not
Standard and Poor's economist Cynthia Latta downplayed concerns about overall drug prices: "There's nothing much to complain about. If you look behind (the drug price increase), what you see is there isn't any upward pressure on prices" (Bloomberg News/Sun, 6/13). But First Union Corp. economist David Orr said, "In the last couple of months prescription drugs have been going up at an 85% annual rate. This can only mean that health care costs are no longer going to be a disinflationary force" (Wall Street Journal, 6/15).
Read This Sitting Down
Hospital costs for drugs are behind a suit filed by a patient in New York "who gagged" after receiving an itemized bill with a $24 charge for one Tylenol tablet. Laurence Paskowitz filed a class-action lawsuit in Manhattan Supreme Court against the Manhattan Hospital for Special Surgery, hoping "to force the hospital to make refunds" to any patients charged in the same fashion (Arena/Lewis, New York Daily News, 6/14). In his suit, Paskowitz said the "$24 fee was 'grossly overpriced' and 'unconscionably excessive,'" the New York Post reports. Hospital officials concede that the "charge must have been for 12 Tylenol tablets, not one," although Paskowitz only received one during his stay (Italiano, 6/13). One area drug store manager said that "lawsuits such as Paskowitz's push hospitals to resort to high markups." "Their overhead is much higher than ours. The people that complain about the cost of the pills are the same people who sue," he said (Daily News, 6/14).