Pharmaceutical Companies' Price Hikes Post-Healthcare Reform Failure
The failure of healthcare reform in September 1994 led to a surge in drug prices, with prescription medications rising 0.6% in October, driving up the overall medical care price index by 0.6%. According to the U.S. Bureau of Labor Statistics, medical care prices increased more than overall inflation, which rose only 0.1% in October. This sudden jump in prices has left healthcare industry leaders and economists questioning whether the marketplace was truly controlling prices during the reform debate, or if companies held back on price increases only to let them climb once the pressure was off.
Key Takeaways:
- Pharmaceutical companies' prices increased 0.6% in October, with prescription medications leading the charge, which translates to an annualized rate of 7.5%.
- Since October 1993, medical care prices have risen 4.7%, with a 12-month annual rate of 3.4% for drug prices.
- Medical care services jumped 0.6% in cost, with a 0.9% hike in dental fees, while physician services rose 0.4%, or 4.1% since last October.
- Hospital prices climbed 0.3% for the month or 5.1% for the previous 12 months.
- Warren Greenberg, PhD, a professor of health economics at George Washington University, notes that new health care innovations and the demand for them by patients will drive prices up in the long term.
- Daniel Ginsburg, an economist with the Bureau of Labor Statistics, acknowledges a historic relationship between healthcare reform debates and prices, but notes each episode has unique characteristics.
- Ginsburg believes the threat of reform may have inhibited price hikes during the debate, but it's "much too early to say" if there will be a return of medical care inflation as it was prior to that.
Statistics:
- October 1994 Consumer Price Index increase: 0.1%
- Medical care price index increase: 0.6%
- Prescription medication price increase: 0.6% (annualized rate: 7.5%)
- Drug prices since October 1993: 3.4%
- Medical care services increase: 0.6%
- Dental fees hike: 0.9%
- Physician services increase: 0.4% (annualized rate: 4.1%)
- Hospital price climb: 0.3% (12-month rate: 5.1%)
- Producer Price Index (wholesale drug prices): up 1.9% since October 1993
Sources:
- U.S. Bureau of Labor Statistics
- Pharmaceutical Manufacturers Association (PMA)
- Warren Greenberg, PhD, professor of health economics at George Washington University
- Daniel Ginsburg, economist with the Bureau of Labor Statistics
- October 1994 Consumer Price Index report
- U.S. Bureau of Labor Statistics, Producer Price Index report
- George Washington University, Health Economics department