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Executive Summary

Prescription drug prices at the manufacturer level rose 6.8% for the period December 1991 to December 1992, according to preliminary Producer Price Index data from the Bureau of Labor Statistics released Jan. 14. The 6.8% change marks the third straight year that drug price inflation has moderated and is the lowest year-end drug price inflation figure recorded since the current index base year of 1981. Drug prices increased by 9.7% in 1989, 8.1% in 1990 and 7.9% in 1991. However, the gap between manufacturer price increases for all finished goods and drug price increases has widened since 1990. Last year, prices for finished goods increased 1.6% compared to a .1% decrease in 1991 and a 5.7% rise in 1990. During HHS Secretary-designate Donna Shalala's first confirmation hearing before the Senate Finance Committee Jan. 14, Senate Aging Committee Chairman Pryor (D-Ark.) continued his barrage against the pharmaceutical industry, citing the pledge of some firms to hold price rises to inflation (for coverage of Shalala's two days of testimony on Capitol Hill, see p. 7). The Arkansas Democrat charged that "the drug companies did not last year raise their prices at three times the cost of inflation, they raised their prices four times the cost of inflation," adding that " with their large tax breaks for research and development and the [Section] 936 tax break in Puerto Rico, and all of the other tax breaks they receive." Pryor's remarks were made in reference to November 1991- November 1992 BLS data indicating that prescription drug prices rose 5.2% at the manufacturer level for the 12-month period. In a Dec. 21 press release, the Pharmaceutical Manufacturers Association praised the same results, saying the 5.2% rise was the "most modest" PPI price increase for pharmaceuticals in 14 years. In the same period, producer prices for all finished goods rose 1.3%. Among the prescription drug categories tracked by the BLS, major tranquilizers showed the largest producer price increase in 1992 at 17.2%. Double-digit increases were seen also in diuretics (12.7%), cancer therapy products (11.2%) and sedatives (10.9%), as well as in the tranquilizer category overall (11.1%). Anticonvulsant and antihistamine prices, which showed some of the largest increases in 1991 at 15% and 15.1%, slowed their growth in 1992 to 7% and 3.9%, respectively. The only pharmaceutical categories in which prices decreased in 1992 were non-narcotic analgesics excluding aspirin and related drugs (-2.5%), and broad and medium spectrum antibiotics excluding cephalosporins, erythromycins and tetracyclines (-.7%). Nonprescription drug prices rose 5.2% for the year, compared to 5.1% in 1991. Some of the larger increases were seen in cough and cold preparation (6.9%) and antacid (5.8%) prices. External analgesics and counterirritants, laxatives and dermatologicals were among the categories showing slower growth at 3.6%, 3.1% and 1.5%, respectively. Producer prices for biological products, excluding diagnostics, were up 3.1%. The average wholesale price increase for all pharmaceuticals was also lower in 1992, according to information from First DataBank's annual report on drug prices released Jan. 14. The average price increase was 5.5% in 1992; in comparison, the average increase was 7.6% in 1991, 8.8% in 1990 and 8.4% in 1989. First DataBank also reported smaller average increases for the "top 25 pharmaceutical companies" (4.3% in 1992 versus 5.1% in 1991); generic products (5.3% versus 7.3%); multiple-source brands (5.9% versus 9%); and single-source brands (6% versus 8.3%).

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