Prices of Common Brand-Name Medicines Rose an Average 7.4% Last Year
Tuesday, March 4, 2008 16:14 EST
WASHINGTON, D.C. -- Drug makers increased their prices last year by
an average of 7.45% for brand-name medicines most commonly prescribed
to the elderly, according to AARP.
The increase was about 2.5 times overall inflation, continuing a
AARP has tracked drug prices since 2002.
Specifically, it looks at the prices charged to wholesalers. It noted
that the price increases have been slightly greater since the Medicare
drug benefit kicked in Jan. 1, 2006.
In the four years before the benefit's startup, wholesale prices rose
between 5.3% and 6.6% a year, according to AARP's tracking.
AARP officials said the outcry over drug prices was quite strong when
Congress approved legislation establishing the drug benefit. Since the
drug benefit began, that outcry has diminished, thanks to the federal
government picking up much of the tab for beneficiaries' medicine.
"Unfortunately, many manufactures have taken the absence of an outcry as
a green light to go ahead and raise prices even more," said John Rother,
AARP's policy director.
All but four of the 220 brand-name prescriptions in the study had price
increases during 2007. Nearly all exceeded the rate of general
inflation. Among the top 25 drug products, the sleep aid Ambien had the
largest price increase, 27.7%. Ambien is manufactured by Sanofi-Aventis.
On the other end of the spectrum, Merck's cholesterol drug Zocor had no
price change in 2007. Also, Bristol-Myers Squibb's blood thinner Plavix
had a price increase of 0.5%.
The manufacturer's wholesale price is the most substantial component of
a prescription drug's retail price. However, insurance companies, such
as those that cover Medicare beneficiaries, typically negotiate
confidential rebates from the manufacturer, which can be passed on to
the customer. Plans could potentially negate a higher wholesale price by
negotiating a steeper discount or by lowering their reimbursement rates
Still, a change in the wholesale price generally leads to a similar
percentage change in the price of most prescriptions, AARP said.
The trade group representing drug makers, the Pharmaceutical Research
and Manufacturers of America, said AARP's numbers don't reflect the true
amounts that consumers pay for medicine. Nor do the numbers reflect a
slowing in the growth of drug prices when taking into account generics.
Since 2000, prescription drug prices, as measured by the federal
government, have increased more slowly than overall medical inflation,
said Ken Johnson, senior vice president for the trade group.
Johnson pointed to government figures that show prices increased 3.7%
annually for medicines versus 4.3% for overall medical inflation.
The government's price index for medicines includes a blend of
brand-names and generic drugs that represents what "consumers actually
buy _ rather than the few selectively highlighted by AARP," Johnson said.
AARP planned to officially release its report on Wednesday. While the
report focused on higher prices for brand names, federal health
officials note that more people are taking generic medicines. They say
that trend has accelerated as a result of the Medicare drug benefit.
Insurance plans use tools, such as lower co-payments for generics, to
steer consumers to lower-priced medicines. Government economists say
about two-thirds of all prescriptions now are generics.
"That's been the good-news story," Rother said. "The plans have done
what we hoped they would do, which is shift people to lower-cost generic
drugs," Rother said. "However, savings from people shifting to generics
are being offset by these higher prices for brand names."
Johnson said prescription medicines account for about 10 percent of
total national health care spending _ a percentage that has not changed
despite roughly 14 million seniors and disabled people gaining
prescription drug insurance since the drug benefit began.
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