Published Online: Thursday, November 1, 2007

Prescription drugs, which have drawn fire in recent years for helping to drive up overall health care costs, are now getting credit for helping to hold those costs down, and the increase in generic prescribing over the past few years is being cited as the key factor in that turnaround. The latest Labor Department statistics show that annual inflation in drug costs is at the lowest rate in 3 decades—a meager 1%. That is less than one fourth of the 4.4% increase in prescription drug prices experienced in 2005.

In part, government economists attribute the decline in prescription inflation to generic-drug price reductions by major pharmacy and discount store chains over the past year. Efforts by managed care groups to encourage generic prescribing through reduced copays and other strategies were also instrumental, they said.

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