Thursday, June 22, 2006

Drug prices rose sharply

Prices for some of the most widely prescribed drugs rose sharply during the first quarter of the year, according to two separate studies. AARP said prices charged by pharmaceutical makers for brand-name drugs rose 3.9%, four times the general inflation rate. Overall higher prices mean the cost of providing brand-name drugs to seniors rose by almost $240 on average for the 12 months ended March 31. The second survey by Families USA found similar inflation rates among brand-name drug prices. The drug price increases could have a devastating effect on the new Medicare drug program. High drug prices could lead to higher premiums, which could discourage some people from enrolling in the program or staying in the program [the ones least likely to need the service, a concept known as anti-selection in the insurance industry], which in turn could lead to even higher premiums.

Imagine that. Dramatically increasing demand by instituting Medicare drug coverage caused prices to go up dramatically. Who could have predicted such a thing? Certainly not me. I mean, it's not like they explain this in Economics 101 or anything.

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