Here's some rock-and-a-hard-place news about drug costs. Drug makers raised prices by an average of 7.4 percent [0] on the brand-name meds most often prescribed to the elderly. The increase outpaced inflation by a huge margin. Meanwhile, the government's price index has shown less growth, largely because of generic switching. So branded drugs cost significantly more, but because people are taking more generics, overall drug spending hasn't grown as fast [0].

But here's the kicker. A new study shows that when people think a drug is more expensive, it appears to work better. Researchers tested two dummy pain pills against each other; one was given a price tag of $2.50 per pill and the other had been "discounted" to 10 cents. More patients taking the $2.50 pill reported pain relief than those taking the cheaper one--85 percent to 61 percent, respectively.

This phenomenon might explain the popularity of brand-name meds over cheaper alternatives--and it may explain why patients report a difference in their response to generics after they switch from a brand-name.

We're left with two questions: In the interest of saving money without losing effectiveness, how can patients' expectations be managed when they switch to a generic [0]? And when drug makers hike up prices, does the price-tag effect make those drugs suddenly more effective? Points to ponder.

- read the Washington Post story [1] on rising prices
- see Pharmalot's chart [2] on brand-name drugs and their prices
- check out the placebo article [3] in the New York Times
- find more [4] on the placebo study in the Washington Post
- see this LA Times column [5] on drug prices

Related Articles:
Insurers pay docs for generic-switching. Report [5]
Drug makers jack prices up 7.8%. Report [5]
Specialty drugs emerge as key price driver. Report [6]
Generics beat down drug price inflation. Report [6]
Report claims generics could save system $20B. Report [7]