This article in the NYT cites research suggesting that drug makers have been increasing their prices exorbitantly over the past year or so to establish a new ceiling so that they can then "lower" their prices to comply with new federal health care regulations. These prices have risen about 9% over the past year, compared to a decrease of 1.3% in the overall Consumer Price Index.
The pharmaceutical industry denies that what they're doing is nefarious, stating that the higher prices are so that they can "maintain the profits necessary to invest in research and development of new drugs." If this is the case, what are we to make of evidence (see here and here) that finds that the pharmaceutical industry spends over twice as much on promotion as they do on research and development?
On a related issue, what about the amount that pharmaceuticals spend on "lifestyle drugs?" I couldn't readily find statistics that would tell us the amount that pharmaceutical companies expend to research, develop, and promote lifestyle drugs compared to the amount they spend on livesaving drugs, but my impression from perusing some sources is that it may be fifty percent or more.
So, they spend twice as much to market their drugs as they do to research and develop them, and most of the drugs they do research, develop, and sell are drugs made for the affluent among us who are having a hard time getting hard. As it turns out, researchers have even found that the marketing that pharmaceutical companies produce is often inaccurate and misleading to the extreme.
In summary, I'm inclined to conclude that the pharmaceutical industry is telling lies and doing a pretty good job with their smoke screen.
(Here's another discussion of the topic from the New York Review of Books in July 2004.)