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Name an Industry That Can Jack Prices Up 13% in This Economy

The economy may be as sour as some candies, but that has not stopped the pharmaceutical industry from raising drug prices. In fact, the prices for a so-called basket of the most widely used brand-name drugs rose 13.3 percent from September 2011 to September 2012, far exceeding the 2 percent inflation rate, according to the latest drug trend report from Express Scripts, the pharmacy benefits manager.

During the same 12-month period, prices on generic drugs fell 21.9 percent. The 35.2 percentage point net inflationary effect is the largest widening of brand and generic prices since the PBM began calculating its Prescription Price Index in 2008, the report states. This was the second consecutive year in which brand-name prices rose about 13 percent, but generic prices fell just 2.9 percent during the previous 12-month period.

What accounts for the disparity? Express Scripts points a finger at the so-called patent cliff in which patents on best-selling drugs recently expired and brand-name drug makers faced lower-cost generic competition. There are different ways to compensate, of course. One is to develop or acquire new drugs that ring the register, which has proved difficult across the board. The other is to raise prices on the remaining product portfolio.

Among the notable examples of big-selling medicines that lost patent protection and faced cheaper generics during the 12-month period that was studied – the Lipitor cholesterol pill that is sold by Pfizer (PFE) and the Plavix blood thinner that is marketed by Bristol-Myers Squibb (BMY) and Sanofi (SNY).

PFE Revenue TTM Chart

PFE Revenue TTM data by YCharts

PFE Chart

PFE data by YCharts

“The big takeaway from this for me is actually not so much that we have ongoing brand inflation, because we’ve always had that, though it’s larger than usual,” Steve Miller, chief medical officer at Express Scripts (ESRX), tells Reuters. “What’s really remarkable is the gap (between branded drug prices and generics) is getting larger because of the number of generics and the discounts on those generics are steep.”

To read the remainder of this article, go to Pharmalot.

Ed Silverman is the editor of Pharmalot and a contributor to YCharts, which includes the just-released YCharts Pro Platinum for professional investors.

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