Drug Prices Rise In Fourth Quarter Generics Face Less Price Pressure

Drug prices, led by brand-name pharmaceuticals, rose at a faster clip in the fourth quarter, according to an industry report.

Prices for prescription medicines, including brand-name and generic drugs, advanced 3.1 percent in the October-December period, compared with the fourth quarter of 1996, industry researcher IMS America Inc. said Friday.

The gain was ahead of the 2.9 percent posted in the third quarter of last year and the 2.3 percent recorded in both the first and second quarters.

For the year as a whole, drug prices rose 2.5 percent at the producer level. In comparison, consumer price inflation was 1.7 percent.

Managed-care insurers have found it hard to hold down drug prices by restricting patients’ choices, said Hemant K. Shah, an independent drug industry analyst in Warren, N.J. They fear criticism by consumer groups and lawmakers for denying coverage, he said.

“The pharmaceutical industry has entirely regained the pricing flexibility they had lost in the early ‘90s, because managed care isn’t a factor,” Shah said. “As long as physicians are in control, pharmaceutical companies are in great shape.”

Shah expects list prices for brand-name drugs to rise by 4 percent to 6 percent this year, although drug companies offer big buyers discounted rates.

Branded drug prices were up 4 percent in the fourth quarter, according to IMS.

At pharmacies and other retail outlets - where most consumers buy their drugs - prices rose more, at 3.8 percent overall, up from 3.4 percent in the third quarter.

Brand-name drugs, at the retail level, cost 4.8 percent more than during the fourth quarter of 1996. The retail price of generic drugs, which fell 6.9 percent in the third quarter after a series of double-digit declines, dropped at an annual rate of 5.7 percent in the October-December period.

Although prices continue to rise, the increases remain less than half the pace of 1989, when overall drug price increases peaked at 8.5 percent. That pace gradually slackened to 3.6 percent in 1993 and 1.9 percent in 1995 before apparently bottoming out at 1.6 percent last year.

Myron Holubiak, head of consulting for Plymouth Meeting, Pa.-based IMS, suggested that generic manufacturers may be unable to lower prices as much as in the past because profit margins have grown so slim.

Prices of the top-selling branded drugs rose at an average annual rate of 3.1 percent at the producer level.

They were: Astra-Merck & Co.’s ulcer drug Prilosec, Eli Lilly’s anti-depressant Prozac, Merck’s cholesterol-lowering drug Zocor, Amgen’s injectible anemia drug Epogen, Pfizer’s antidepressant Zoloft, SmithKline Beecham PLC’s antidepressant Paxil, Warner-Lambert Co. and Pfizer Inc.’s jointly marketed cholesterol-lowerer Lipitor, Pfizer’s Norvasc, SmithKline’s antibiotic Augmentin, Glaxo-Wellcome’s migraine drug Imitrex and Bristol-Myers Squibb Co.’s allergy medicine Claritin.

Lipitor, which wasn’t sold in the fourth quarter of 1996, wasn’t included in calculating the overall price increase of branded drugs.