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Reality Check

Reality Check

DRUG-COMPANY BASHERS SAY pharmaceutical companies are gouging a vulnerable public. Ranging from the White House to Congress, they compare wholesale drug prices (up 3.1% last year) with producer prices (up just 0.2%). Senator David Pryor (D-Ark.), a veteran industry critic, figures that means drug inflation was running at 15.5 times the true inflation rate. The message is we need "meaningful restraints" (read: price controls) on drugs.

IN REALITY, drugmakers' fat days are over. From 1980 to 1991, they indeed boosted prices at the consumer level by more than 9% annually nine times. But last year, drug prices at the consumer level rose 3.3%, only a bit more than the 2.7% hike in the consumer price index--the best yardstick for costs to the public. Washington pressure only partly explains this. More important, big managed-care buyers of drugs pit competing medicines against each other, forcing discounts. And new, budget-price copycat medicines lower the markup more.