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Rx DRUG PRICES AT MANUFACTURER LEVEL FLATTEN DURING SECOND QUARTER; Rx PRICES STILL ON TRACK FOR NEAR DOUBLE-DIGIT GROWTH IN 1986, BLS DATA SHOW

Executive Summary

Rx drug prices at the manufacturer level flattened during the second quarter of 1986, growing only .6%, after a 4.5% run-up during the first three months of the year. According to recently-released Bureau of Labor Statistics' Producer Price Index data for June, Rx drug prices from manufacturers increased 5.1% during the first half of 1986. The six months rise in Rx drug prices is similar to the 5.5% increase in Rx drug prices at the manufacturer level during the same period of 1985, when Rx prices for the full year increased 9.6%, based on Producer Price Index figures. The 5.1% first half price inflation for Rx drugs compares with a 3.3% producer price growth for OTC pharmaceuticals and a 3.8% price gain for all drug products, which includes pharmaceutical materials, biologicals, and veterinary drugs as well as Rx and OTC products. While drug prices continue to rise, the Producer Price Index for finished goods fell 2.9% during the first half of 1986. The 1986 price growth for Rx drug products, so far, follows recent historical patterns for Rx drug pricing. After a significant price Jump in January (2.2% in 1986), Rx drug prices edged upward through May (up 6.6% for the first five months), until a moderate decline in June (down 1.4%). Except for the first half of 1984, when Rx drug prices grew only 3.3%, manufacturer prices for Rx drugs have risen between 5% and 7% during the first six months of every year since 1981. Rx price gains during the first quarter have generally been in the 4.5-4.7% range with price growth in the second quarter usually slowing. Third quarter producer price increases for Rx drugs in recent years have been roughly in the 2% range with the exception of 1984, when Rx drug prices rose only .5% in the third quarter, according to Bureau of Labor Statistics' data. From 1981-1983, Rx drug prices at the producer level showed double digit annual growth. However, producer prices for Rx drugs have moderated slightly the past two years, growing 8.2% in 1984 and about 9% last year. Therapeutic areas for Rx drugs demonstrating the greatest amount of pricing flexibility during the first six months of the year were antihypertensives (up 10%), cardiovasculars not including antihypertensives and vasodilators (up 9.9%), and muscle relaxants (up 9.1%), according to the Bureau of Labor Statistics. Through the first five months of 1986 (data were unavailable for June), Rx bronchial therapy prices rose 8.9%. Sedative prices in January and February alone -- the only two months for which data were available -- jumped 19.6%, according to the BLS data. Only two categories out of the 32 therapeutic categories and subcategories of Rx drugs listed in the producer price index had price declines during the first half of 1986. The producer price index for anticoagulants, up 11.4% in 1985, slipped 7.7% during the first five months of this year (data for May were unavailable). The index for antispasmodic/antisecretory drugs was off .9% in the first six months of the year. Other Rx categories moderating in price during the first half of 1986 were analgesics, up 3.3% after increasing in price by more than 16% in 1985; anticancer agents, up 3.6% after a 16.6% price run-up in 1985; and dermatological preparations, up just 1.2% after a 33.7% price jump last year. The producer price index for hormones shows a 10.6% drop in June, limiting hormone price gains to 10% for the last 12 months. Prices for biologicals at the producer level were flat during the first half of 1986 after rising over 17% in 1985, according to the Bureau of Labor Statistics. Bulk medicinal chemicals and botanical products continue to decline in price, falling 1.1% during the six month period. A subgroup, synthetic organic medicinal chemicals, declined in price even further, falling 2.5% during the first half of the year. Despite the well-publicized price increases for DPT vaccine due to liability costs, the Bureau of Labor Statistics' producer price index for vaccines, toxoids, and antigens for human use grew only .5% in six months. Charts omitted.
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