Offering data that could provide ammunition for drug manufacturers accused of price gouging, a new congressional report says the federal government may have overstated drug-price inflation by more than one-third between 1984 and 1991.
The General Accounting Office, Congress' investigative arm, said the Bureau of Labor Statistics overestimated drug-price inflation by 23% to 36% because it underrepresented new and very old drugs in its drug-price marketbasket.
Those kinds of pharmaceuticals increase in price more slowly than drugs 4 to 9 years old, resulting in inaccurate inflation figures, the agency said.
The GAO added that the bureau did not account for cost savings generated from substitution of generics or cheaper brand-name drugs and did not differentiate between pure inflation and price increases resulting from product improvements, further skewing inflation statistics.
The Bureau of Labor Statistics estimated that drug prices increased an average of 9.4% a year between 1980 and 1992, compared with a general annual inflation rate of 4.3%.
The GAO acknowledged that the bureau, part of the Labor Department, may have solved some of the problems in overestimating drug-price inflation when it changed its procedures for sampling drug prices in 1994.
The new procedures include updating the marketbasket every four years-rather than every five to seven years-and making intermediate adjustments every two years.
But the GAO said the bureau also must address the question of product substitution.
The Pharmaceutical Research and Manufacturers of America called the report "an important document to read at a time when pharmaceutical price increases have been criticized by some key policymakers."