Price hikes could raise $10 billion in additional income for pharmas

Pharmaceutical companies have been asked to help fund health reform by cutting drug costs $8 billion per year over the next 10 years. But while this sounds good, drugmakers may be taking steps to soften or even nullify the financial effect of their agreement with the Obama Administration.

Over the last year, pharmas have raised wholesale prices on brand-name meds by about 9 percent, the fastest rate since 1992, according to an analysis published in The New York Times. The price increases have pushed the average annual cost for brand name drugs to now more than $2,000 per year, according to Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota, who has analyzed drug pricing for the AARP.

These price hikes should raise about $10 billion in addition income for pharma, putting it $2 billion in the black even after making the promised concessions.

Drugmakers contend that they are raising prices to compensate for the impact of patent expirations over the next few years, as well as to fund R&D for new drugs. Critics, on the other hand, say that pharmas are working to cancel out the effect of the price-cutting agreements they've made.

To get more details on pharma pricing strategies:
- read this piece in The New York Times

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