US GAO finds "extraordinary" increases in drug prices

* Number of drug price hikes doubled from 2000 to 2008

* Industry says GAO analysis too narrow

* Senators see need for Medicare drug negotiations

By Susan Heavey

WASHINGTON, Jan 11 (Reuters) - Prices for hundreds of brand-name drugs have soared since the beginning of the decade, especially those that treat depression, infections and heart disease, according to a U.S. government report on Monday.

The nonpartisan General Accountability Office said it found "extraordinary price increases" for 321 brand-name drugs, with prices jumping by 100 percent to 499 percent -- and in a few cases by more than 1,000 percent.

The number of drug price increases more than doubled from 2000 to 2008 with most drugs maintaining their higher prices over time, the investigative arm of Congress said.

GAO's findings came as lawmakers work to finalize Senate and House versions of legislation overhauling the nation's healthcare system. Some critics say both proposals are too generous to the pharmaceutical industry and fail to do enough to rein in costs.

Lawmakers have also raised concerns that drug companies such as Pfizer Inc (PFE.N) and Merck & Co Inc (MRK.N) raised some drug prices ahead of anticipated reforms.

Drugmakers in June made a $80 billion, 10-year pact with Senate Democrats and the Obama administration that could limit concessions from the industry, which agreed to pay millions of dollars in annual taxes as well as help lower prices for some seniors in the Medicare prescription drug program.

Democratic senators Charles Schumer and Amy Klobuchar requested the GAO analysis and said it shows more must be done to make medicines affordable, including allowing the federal government to negotiate prices.

"This is further proof that Medicare should be allowed to negotiate drug prices, just as the Veterans Administration does. It would help save taxpayers a lot of money," Klobuchar said.

The influential industry group Pharmaceutical Research and Manufacturers of America (PhRMA) criticized the GAO report for focusing "only on a small number of selected brand medicines rather than the entire prescription drug market."

The GAO itself noted that the number of products that saw increases -- as many as 416 products when different doses and formulations were factored in -- represent only about half of 1 percent of all brand-name drug products.

It also said about half of the price hikes were seen with products that are repackaged in smaller amounts for use by hospitals or physicians.

It is unclear what, if any, changes the $315 billion pharmaceutical industry could see in the final version of a healthcare reform bill expected before President Barack Obama's State of the Union speech in early February.

PhRMA has made clear it supports the Senate's bill rather that the House version, which would cost drug companies more.

Several other investigations into drug prices are pending, including another GAO report requested by House Democrats and a review by the Department of Health and Human Services inspector general sought by Democratic Senator Bill Nelson.

The GAO report was posted at: here. (Reporting by Susan Heavey; Editing by Gary Hill)