Prescription Drug Costs Up 56% Since ’81

Costs for prescription drugs have increased two to three times faster than all consumer prices since 1981, while the drug industry’s sales profits averaged nearly three times that of all manufacturers over the same period, according to a congressional report released Monday.

The report, compiled by the health and environment subcommittee of the House Energy and Commerce Committee, cited Bureau of Labor Statistics figures. They showed that, while the overall inflation rate rose 23% between 1981 and 1985, prescription drug costs jumped 56%.

“One can only conclude that what is going on in this industry is greed on a massive scale,” Rep. Henry A. Waxman (D-Los Angeles), chairman of the subcommittee, said at a hearing called to examine the trend. “This is an industry that insists on increasing its profits at the expense of the sick, the poor and the elderly.”

Many on Fixed Incomes

Many of them, he said, live on fixed incomes and often “must pay out of their own pockets, since neither Medicare nor most private insurers reimburse for prescription drugs consumed outside of hospitals.”

But representatives of the drug industry, defending the rising prices of manufacturing their products, said the increases have been necessary to meet escalating costs of research and development. New or improved medicines in the long run contain the total cost of health care and contribute to longer life-spans for all Americans, they said.

“The medicines developed . . . have done more to improve the quality of life than have the products of any other industry,” Gerald J. Mossinghoff, president of the Pharmaceutical Manufacturers Assn., said. “The research-based pharmaceutical industry has discovered, developed and produced the overwhelming majority of new medicines and vaccines that have helped to control diseases that were once leading causes of death.

“In 1976, it cost about $54 million to develop a new drug and obtain approval from the Food and Drug Administration to market it,” he said. “We estimate that cost today at $94 million.”

Percentage Unknown

But under questioning, representatives of the Pharmaceutical Manufacturers Assn. and three individual drug companies said they could not provide the specific percentage of the increase in prescription drug prices that goes into research and development.

The study, comparing drug industries’ profits to that of all manufacturing corporations, also said that drug manufacturers had an average after-tax profit rate of nearly 12.7% since 1981, while the average rate for all manufacturing corporations was 4.2%.

The report said that from 1981 to the present, while the consumer price index rose 23%, prices on four of the five top-selling drugs rose “substantially more.” Dyazide, the best-selling drug used to treat high blood pressure, increased 52%, and the third best-selling drug, Tagamet, used for ulcers, rose 40%, according to the report. Number four, the tranquilizer Valium, and number five, Darvocet N, a painkiller, increased 75% and 68% respectively, the study said.