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Rx DRUG PRICES AT MFR. LEVEL HEADED TOWARD ANNUALIZED DOUBLE DIGIT INFLATION DURING FIRST HALF OF 1985; PRODUCER PRICE INDEX FOR Rx DRUGS UP 5.6% FOR PERIOD

Executive Summary

Rx drug prices at the mfr. level, up 5.6% during the first six months of 1985, appear headed back to double digit growth in 1985 after the rate of increase slowed somewhat in 1984, according to recently released Bureau of Labor Statistics' Producer Price Index data for June. The nearly 6% price growth for Rx drugs is well ahead of the 3.3% price gain registered by the Producer Price Index for Rx drugs during the first half of 1984 and is in the ball park of the 5-7% first half gains from 1981 through 1983. In 1984, Rx drug price growth at the mfr. level slowed to about 8% after annualizing in the 11% range the previous three years. Rx drug price increases at the producer level continue to run well ahead of the Producer Price Index for finished goods, which was up only 0.7% during the first six months of 1985. Rx drug categories showing the biggest first half price gains, according to the Bureau of Labor Statistics' data, were sedatives (up 17.4%), analgesics (up 14.1%), central nervous system stimulants (up 13.8%), and dermatological preparations (up 11.9%). As is traditional, most Rx price increases occurred during the first three months of the year. Of the drug categories showing the most price flexibility during the first half, only analgesics showed significant price growth during the second quarter. The price increase for sedatives, which occurred during the first quarter, follows a 14.5% price decline during 1984 for the drug category, according to the Bureau of Labor Statistics data. Price declines for sedatives, hormones, and antiarthritics during 1984 were largely responsible for the modest slowdown in Rx price growth last year. Anti-arthritic prices fell 10% in 1984 due largely to third quarter cuts in Motrin pricing by Upjohn and Rufen pricing by Boots. During the first half of 1985, anti-arthritic prices at the producer level continued to decline, dropping nearly a percentage point. Hormones as well as oral contraceptives showed no price movement during the first six months of the year. Anticoagulant prices (down 3.2%) dipped the furthest among the Rx drug categories listed by the Bureau of Labor Statistics. Cost pressures in the hospital market continue to hold down anti-infective drug price growth. Producer prices for broad and medium spectrum antibiotics fell .6% during the first half, while the overall index for systemic anti-infectives grew less than 2% during the six month period. Cardiovascular drug prices continue to outpace the overall Rx drug index, growing nearly 10% during the first half. Vasodilator prices climbed 10.9%, antihypertensive prices were up 7.9%, and producer prices for other cardiovasculars grew 10.1%, Bureau of Labor Statistics' figures show. Aggressive pricing for the two leading heart drugs, Ayerst's Inderal and SmithKline's Dyazide, both now off patent, boosted the cardiovascular drug price index. According to figures from Michigan Blue Cross/Blue Shield, prices for Dyazide and Inderal 20 mg are up 26% over the last 12 months, while the price for Inderal 40 mg has increased 14.5%. A Congressional subcmte. staff report, presented with the Michigan Blue Cross/Blue Shield figures at a House Energy and Commerce Cmte.'s Health Subcmte. hearing on Rx drug pricing outlined whsle. price growth over the last four years by the top 20 Rx drugs in terms of unit sales. The report points out that from Jan. 1, 1981 to June 1, 1985, "prices on four of the five top selling drugs rose substantially" above the Consumer Price Index, including Dyazide (up 52%), Tagamet (up 40%), Valium (up 75%), and Darvocet N (up 68%). The report, which credits IMS, Medi-Span, and the American Assn. of Retired Persons Pharmacy Service as its sources, shows major first half price increases by Parke-Davis' Dilantin 100 mg (up 15.1%), Inderal 20 mg and 40 mg (up 14.5%), SmithKline's Dyazide (up 12.1%), and Tagamet 300 mg (up 10%). Wholesale prices for products facing generic competition such as Pfizer's Diabinese, Beecham's Amoxil, Hoechst Roussel's Lasix and J&J's Tylenol #3 were flat during the first half of 1985. Rx drug price increases are not being driven by price inflation for bulk medicinal chemicals and secondary products, the Bureau of Labor Statistics' data indicate. Prices for synthetic organic medicinal chemicals are up 1.7% since December, but over the last 12 months have actually declined .9%. Over the last three years, the Producer Price Index for synthetic organic medicinal chemicals has dropped 8.6%. Secondary products have declined in price by 3.2% since December, but are still up 2.6% since last June. Charts omitted.

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