Markets

GAO Report on Drug Price Increases Raises More Questions Than Answers

By Jim Edwards

Updated on: January 12, 2010 / 10:25 AM EST / MoneyWatch

The Government Accounting Office's report into drug pricing -- which found that 416 drug brands had "extraordinary price increases" between 2000 and 2008 -- raises more questions than answers: The list of drugs that took price increases of more than 100 percent is littered with brands that have competitors and equivalents.

One of the report's main conclusions is that unique drugs which lack competitors cause higher prices:

... a lack of therapeutically equivalent drugs--both generics and other brand-name drugs used to treat the same condition--and limited competition may contribute to extraordinary price increases.

But the GAO's hit list shows many brands that either have equivalents or similar alternatives, or are actually equivalents of each other (in other words, the brands taking price increases had equivalents that were also taking price increases). Here's a list of them:

Antidepressants: Abilify Prozac Paxil Effexor
Sleeping pills: Ambien Lunesta
Cholesterol statins: Lipitor Zocor
Antipsychotics: Risperdal Seroquel Zyprexa
Painkillers: Bextra Celebrex Vioxx Motrin Voltaren (The first three are all Cox-2 painkillers!)
Antacids: Prilosec Prevacid Pepcid (Yes, I know the first one is a proton-pump inhibitor, but they all so the same thing.)
Contraceptives: Vivelle-Dot (There are dozens of other pills available, many are cheap generics.)

Why aren't these products competing on price? Here's one potential answer: Step into the spotlight Adderall, made by Shire (SHPGY). Since at least 2008, Shire has manipulated the price of Adderall, making it artificially expensive. Shire hopes patients will switch to the cheaper ADHD drug, Vyvanse, a new brand also made by Shire. (The strategy had mixed success: Adderall sales collapsed as soon as generic competition arrived, Vyvanse sales have gone up but are nowhere near as big as Adderall's used to be.)

Cepahlon (CEPH) is doing the same thing with Provigil and its replacement, Nuvigil -- and the FTC is investigating.

Conspicuous by their absence from the GAO report: Pfizer (PFE)'s Viagra and Eli Lilly (LLY)'s Cialis. BNET recently reported that both drugs doubled their prices over the last few years despite the "competition" between them.

And finally: Think the efficiencies generated by all those pharma M&A's will dribble through into cheaper drug prices? Think again. The GAO says M&A and drug IP acquisition may actually restrict competition, making prices rise:

The transfer of the rights to a drug and corporate consolidations among drug companies may result in fewer drug options and contribute to extraordinary price increases, according to experts. For example, the rights to four of the case-study drugs were obtained by a new drug company, and two of these drugs had an extraordinary price increase shortly after the rights to the drugs were purchased.

Image by Flickr user Rodrigo Senna, CC