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Executive Summary

Rx DRUG PRODUCER PRICES RISE 7.5% IN NINE MONTHS of 1989 and have climbed 7.9% for the 12-month period from September 1988, according to the Labor Department Bureau of Labor Statistics' producer price index data released Oct. 12. Prescription drug prices at the manufacturer level climbed 2.5% in the quarter from July through September after inching ahead 0.3% in the second quarter, which historically is a period of price moderation. The rate of inflation for drug prices was significantly less in a one-month comparison with the inflation rate for finished goods, but much greater for the first nine months of the year. The PPI for all finished goods climbed 0.9% in September, while drug prices declined 0.7%. Through the nine months of 1989, the PPI for finished goods is ahead 3.2%. CNS stimulants/anti-obesity preparations led the increase in the PPI for prescription drugs with a price rise of 36.2%. for the nine months. The class was one of 10 drug categories where producer prices were up more than 10% for the nine-month period. For the third quarter, CNS stimulants/anti-obesity preps also experienced the highest rate of inflation among prescription drugs, increasing 10.9%. Hormones were the only class besides CNS stimulants/anti-obesity drugs where manufacturer-level prices pulled ahead more than 20%; the PPI for hormone drug products rose 23.3% through the nine months and 17.6% in the quarter. Joining the 10%-plus price rise ranks for the period January through September were: anti-arthritics; vasodilators; cough and cold preps; nasal decongestants; acne preps; psychotherapeutics; tranquilizers as a whole and minor tranquilizers. While the third quarter saw four drug categories with some inflation moderation, only two drug products had declines in their PPI level in the nine-month period. So far this year, the producer-level prices for anti-arthritics and broad and medium spectrum antibiotics are down 4.5% and 2.4%, respectively. Quarterly lessening of their price inflation was greater, with PPI declines of 7.9% and 3%, respectively. Other prescription drugs bucking the 2.5% overall inflationary trend for the quarter were major tranquilizers (down 0.3%) and manufacturer prices for adult multivitamins, which remained unchanged. The PPI for all OTC drugs increased 3.7% in the first nine months of 1989. Following a 3.1% rise through the first half, the quarterly PPI dropped 0.6%. Acne preps is the category with the greatest pricing flexibility among OTC products so far this year; the category was up 7%.

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