...And Why Prescription Prices May Even Drop

Spurred by the research described above, the government is now weighing ways to improve its drug price measures. Meanwhile, the drug industry itself has been exercising price restraint. And even more price moderation seems to be in the wings.

A recent General Accounting Office report found that in 1991, drugmakers charged wholesalers 60% more in the U.S. than in Britain for a market basket of 77 frequently dispensed brand-name prescription drugs. One reason for the difference was that the U.S. market has many buyers, whereas in Britain the government pays for most such purchases, and thus can exert heavy bargaining power on producers.

But the U.S. market is now shifting dramatically--away from traditional wholesalers and toward mail-order pharmacies, managed-care groups, and government programs like Medicaid, which are able to negotiate big price discounts. Industry experts say such channels already account for about half of all U.S. drug sales, and their reach is growing. Thus, overall prescription drug prices, which are up only 3.2% this year, could actually decline somewhat in 1995.