Drug industry hikes prices, undermining its promise

The New York Times reports that drug makers have hiked wholesale prices by 9 percent, or $10 billion, this year in anticipation of Congress passing a health-care reform bill. 

That price hike more than covers the $8 billion price cut that drug makers promised President Obama if health reform passes.

Mind you, their 9 percent increase comes at a time when the consumer price index is in negative territory and millions are out of work, not to mention the uninsured.

The drug companies say they can justify the price increases, but academics who study the industry note that they have seen similar unusual run-ups in price before changes in government programs, including the Medicare drug benefit. 

The whole point of asking the industry for a price concession was to help expand coverage to the uninsured. Presumably the drug industry, like the health insurance sector, would benefit from the additional customers that universal coverage would bring.

This might be a good time to review some data:

--The profitability of pharmaceutical manufacturers for last year was estimated at over 19 percent, according to the Kaiser Family Foundation, which is an impressive performance during a severe recession. In 2006, a chart shows, its near-20 percent profitability was more than three times that of the Fortune 500 group.
 
--Medicare drug plan premiums have risen 50 percent since 2006, the first year the Part D drug benefit was offered, according to U.S. News and World Report.

The drug industry's mighty phalanx of lobbyists was able to  head off any suggestion of letting the U.S. government negotiate better drug prices for Americans, the way that other governments do for their citizens. This boost in prices in the face of a lingering recession and widespread unemployment shows the industry feels immune to any such threat.

Maybe it's time for Congress to reconsider.