Leaders of a Senate panel called for more federal regulation of drug prices Wednesday, citing a report that claimed the pharmaceutical industry had increased prices for the most frequently used prescription drugs last year by as much as five times the rate of inflation.
"Greed has become excessive," said Sen. David Pryor (D-Ark.), chairman of the Senate Special Committee on Aging. "It's unadulterated and there's a lot of it."
Using statistics in a report by a University of Minnesota professor, Pryor and Sen. William S. Cohen (R-Me.), the committee's ranking Republican, argued that many drug manufacturers had broken a 1992 pledge to bring drug costs under control.
They proposed stripping manufacturers of tax breaks and taking other steps if that fails to restrain prices.
The senators noted that while the 1991 profit level of the average Fortune 500 company was 3.2%, the average profit level of the makers of the top 20 prescribed drugs in the United States was 15.1%, a rate that has made them highly attractive to investors.
Pryor noted, however, that some drug manufacturers fulfilled their pledges to keep price increases near the rate of inflation and said, "I want to applaud that."
Drug company officials immediately disputed the findings, alleging that the report's figures were faulty. Pryor "has questioned the integrity of major U.S. companies in America's most technologically advanced industry and he has failed to back up his charges," said Gerald J. Mossinghoff, president of the Pharmaceutical Manufacturers Assn.
Industry officials argued that the report failed to take into account the many discounts and rebates that pharmaceutical makers give such health care providers as hospitals and health maintenance organizations. Additionally, they said, while the prices of some drugs did rise above the Bureau of Labor Statistics 1.5% rate of inflation last year, the cost of others rose at a much slower rate.
The Senate study, which covered the top 200 prescription drugs, found that prices rose 6.4% overall last year. Pryor and Cohen said the most disturbing element of their findings is that drugs whose prices rose fastest are those most commonly used by the elderly. Elderly patients covered by Medicare can least afford such price hikes, they said, because Medicare does not cover the cost of prescription drugs.
Sinemet, for instance, a Dupont-manufactured drug often prescribed for Parkinson's patients, cost pharmacy customers 15.1% more in 1992 than in 1991--an increase five times the 1992 inflation rate.
"We're seeing thousands of elderly people who are saying that they must decide whether to put food on the table, heat their home or buy prescription drugs," Pryor said at a press conference.
Mossinghoff said industry calculations show that drug prices rose 5.7% overall last year, after a 9.4% increase in 1991.
Imposing price controls, he said, would force the industry to cut back on valuable research and development. "At a time when everybody's concerned about this country losing its competitive edge, I don't think Congress is going to be disposed to really hurting one of America's best and most successful high-technology industries," he said.
The senators countered that taxpayers already subsidize the industry through drug research performed by the National Institutes of Health. Drugs developed by NIH are later licensed to pharmaceutical companies.
Pryor and Cohen said legislators should consider rewriting the tax laws that now give drug companies considerable tax breaks for operating in Puerto Rico, where many of the top-selling drugs are manufactured.
Designed originally to boost employment in Puerto Rico, the current tax code now saves the drug companies about $71,000 per employee. The average employee in a Puerto Rican drug factory makes about $26,500 a year.
The senators also made a number of proposals designed to limit prices, including:
* Tax incentives for firms that keep price hikes within specified limits.
* Penalties similar to those in place in Canada, where a drug company loses a year of its patent rights for every percentage point by which its price hikes exceed the consumer price index.
Pryor said he favors delaying any congressional action until lawmakers see President Clinton's health care proposals. Though Administration officials have offered no specific plans about prescription drug pricing, the subject is expected to be addressed later this year as part of a larger health care reform package.
Biggest Price Jumps
The 10 prescription drugs that had the biggest price increases in 1992, according to a staff report Wednesday by the Senate Special Committee on Aging. Prices are for a standard size prescription in each case.
Drug Use Maker % Donnatal stomach medication Wyeth-Ayerst 18.6 PCE antibiotic Abbott Laboratories 17.4 Azmacort asthma inhaler Rhone-Poulenc Rorer 15.6 Tenex hypertension Wyeth-Ayerst 15.3 Sinemet Parkinson's disease Du Pont Merck 15.1 Catapres hypertension Boehringer Ingelheim 13.4 Micro-K potassium supplement Wyeth-Ayerst 13.2 K-Tab potassium supplement Abbott 13.2 Hytrin hypertension Abbott 13.2 Isordil angina Wyeth-Ayerst 13.2
Drug Cost after hike Donnatal $11 PCE $61 Azmacort $36 Tenex $72 Sinemet $65 Catapres $53 Micro-K $13 K-Tab $29 Hytrin $110 Isordil $25
The drug companies disputed many of the report's figures. Du Pont Merck, for instance, said its price increase for Sinemet was 4%, not 15.1%.
Source: Senate Special Committee on Aging