Pharma Companies Take Page From Bankers' Playbooks

Sigh.

Duff Wilson, in today's New York Times, reports that major drug companies are aggressively raising prices in advance of health-care legislation (complete article, here). This sounds suspiciously like the ploy of credit-card companies, raising interest rates in advance of the approved-but-not-yet-in-force Credit CARD legislation (click here for an earlier blog post on that subject).

Note that the drug companies' moves are coming, as Wilson reports, at the same time that they have promised "to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect".

When is a sale not a sale? When the seller hikes prices beforehand to create an artificial "discount" price.

Moreover, these increases come at a time when, thanks to the deep recession, overall consumer prices have been falling: according to the Bureau of Labor Statistics, prices have fallen 1.3% over the last 12 months.

Prescription drug prices, in contrast, are up about nine percent.

But perhaps I'm being unfair to suggest that the pharmaceutical companies have learned from the credit-card companies. After all, Wilson notes that the same thing happened three years ago, just before the Medicare drug coverage program went into effect (click here for Times article from 2006). At that time, according to AARP (the American Association of Retired Persons), which conducted the pricing research, "prices charged by drug makers for brand-name pharmaceuticals jumped 3.9 percent, four times the general inflation rate during the first three months of this year and the largest quarterly price increase in six years."

So maybe it's the credit-card companies who learned from pharma. Either way, we need to send them the "don't be evil" memo.