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Executive Summary

Prescription drug price inflation was .6% in the second quarter, according to the Bureau of Labor Statistics' Producer Price Index released July 10. The second quarter is traditionally a slow period for pharmaceutical price increases. However, the .6% increase coupled with a restated first quarter increase of 3.5% adds up to an inflation rate of just 4.1% through the first half of 1992. By comparison, PPI pharmaceutical prices rose 4.8% in the first half of 1991; the restated 1991 inflation rate of 7.9% was the lowest for prescription drugs in over 10 years. A June to June comparison of drug prices shows a 6.2% inflation rate over the last 12 months. Pharmaceutical price increases continue to exceed the general inflation rate at the producer level: the PPI for all finished goods was up 2.0% for the first half of the year. Many drug companies, however, have pledged to limit price increases to inflation for the year and so raised prices once in the first quarter and have left them unchanged. The PPI reflects this stability: out of 42 categories of prescription drugs listed by BLS, 25 were either unchanged or changed less than 1% (up or down) in the second quarter. The category of urinary antibacterials showed the largest increase for the quarter, up 5.8%. Two of the largest first quarter gainers, tranquilizers and anti-arthritics, showed moderation in the second quarter. Tranquilizers were up just .5% while anti-arthritic prices decreased 7.8%. Through six months, tranquilizers continue to show the most price flexibility, up 11.1%. Psychotherapeutics in general are up 8.3%. Cancer products showed a 9.2% increase. Hormones, on the other hand, showed price deflation of 4.8%. (For a complete list of PPI drug price changes by category, see chart.) Nonprescription drug price inflation was 2.5% for the quarter. Through six months, OTC prices are up 3.4%. Biological products, excluding diagnostics, showed price deflation of .1% in the quarter and inflation of .8% for the six months. The subcategory of biological pharmaceutical preparations was unchanged for the quarter and up .4% through six months.

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