Drug Price Increases Outpace Inflation in First Quarter of 2004, AARP Study Finds
Prescription drug prices rose at a rate nearly three times the rate of inflation in the first three months of 2004, essentially "negating much of the savings" expected to come from the new Medicare drug discount card program, according to a study released Wednesday by the AARP Public Policy Institute, the AP/Houston Chronicle reports. According to the Bush administration, average savings on brand-name drugs available through the discount card program range from 11% to 18% (Sherman, AP/Houston Chronicle, 6/30). The AARP study is the first quarterly update in the group's ongoing survey of drug price increases. In May, the group published a baseline study of drug prices between 2000 and 2003 (AARP release, 6/30). The AARP study uses changes in the wholesale acquisition cost, which is generally the price listed on the invoices between drug manufacturers and wholesalers (AARP study, June 2004).
According to AARP's report, which examined prices of 197 brand-name drugs most commonly prescribed to people ages 50 and older, prices rose by 3.4% in the first quarter of 2004, while the general rate of inflation was 1.2% during the same period (AP/Houston Chronicle, 6/30). Over the 12-month period that ended in March, prices for the drugs rose 7.2%. By comparison, prices for the drugs rose 6.9% for the 12-month period that ended in December 2003 (Heil, CongressDaily, 6/30). According to the AARP study, prices increased on 106 of the 197 medications in the first quarter of 2004 (Baltimore Sun, 7/1).
Prices for 58 of the medicines examined rose more than 5%, while the price of 21 drugs rose more than 7.5% in the first quarter of 2004, according to the study. About 66% of the 25 top-selling drugs had price increases during that time period, the study says (Schwab, Newark Star-Ledger, 7/1). In its report, AARP singled out Bristol-Myers Squibb and Pfizer, which manufacture 12 of the 25 top-selling drugs; the survey found that prices for each of those 12 drugs increased during the first three months of 2004 (Middleton, Dow Jones/Wall Street Journal, 7/1). BMS' stroke-prevention treatment Plavix, which is third in sales among the drugs examined, had the highest percentage increase among the top 25 drugs, with 7.9% in the first quarter (AARP release, 6/30).
According to the AP/Washington Times, the lowest prices available through the prescription drug discount cards have remained unchanged for three of the top-selling drugs -- Pfizer's cholesterol-lowering drug Lipitor and arthritis treatment Celebrex and Merck's osteoporosis medication Fosamax -- and "all can be bought at about the same prices through the online pharmacy Drugstore.com and for much less in Canada" (AP/Washington Times, 7/1). The report is available online.
AARP's Policy Director John Rother said, "This data really shows there's a disconnect between the public debate about affordability of drugs and the industry's behavior" (Schuler, CQ Today, 6/30). He noted that overall, pharmaceutical companies have been "very aggressive" in raising prices because of the discounts that are offered through the Medicare drug card program (MacDonald, Hartford Courant, 7/1). "Manufacturers are offsetting discounts with prices that are higher than they otherwise would have been," he said (AP/Houston Chronicle, 6/30). Rother added that pharmaceutical companies are "undercutting the understanding that was the basis for the [Medicare] law." By issuing the report, AARP hopes to call public attention to the price increases and make drug companies "more aware of public opinion and of the consequences" of ongoing price hikes, Rother said (CongressDaily, 6/30).
CMS Administrator Mark McClellan defended the discount drug card program, saying, "None of our beneficiaries should be paying anything close to list prices for drugs, and more help is available than ever before" (AP/Houston Chronicle, 6/30). Richard Smith, vice president of the Pharmaceutical and Research Manufacturers of America, said, "The facts are clear. Government data, not PhRMA data, show that the prices of medicines have increased at an equal rate to other health care services since the Medicare bill went into law" (Hartford Courant, 7/1). He added, "We urge AARP to put aside the politics of the moment and turn its efforts to signing up as many seniors as possible for the Medicare-endorsed discount cards" (Barfield Berry, Long Island Newsday, 7/1). Pfizer spokesperson Laura Glick said the study reflects annual price increases that typically occur in January. She added, "And that doesn't include mandatory government discounts and other negotiated discounts. We are committed to responsible pricing" (AP/Washington Times, 7/1). BMS spokesperson Rob Hutchison said, "The prices of our innovative medicines reflect the research needed to discover and develop them." According to Hutchison, BMS spends an average of $800 million on each new drug it develops (Newark Star-Ledger, 7/1).
In releasing the report, AARP "reiterated its support" for legislation legalizing the reimportation of lower-cost U.S.-made prescription drugs from foreign countries, CQ Today reports (CQ Today, 6/30). The group earlier this month endorsed a bill (S 2328) sponsored by a bipartisan group of senators that would allow U.S. residents to reimport as much as a 90-day supply of prescription drugs from FDA-approved Canadian pharmacies for personal use. After 90 days, the legislation would allow licensed pharmacists and prescription drug wholesalers to reimport medications from Canada. In addition, U.S. residents who travel to Australia, Japan, New Zealand, Switzerland or current European Union nations could return with as much as a 90-day supply of prescription drugs for personal use. After one year, pharmacists and wholesalers could reimport medication from Australia, Japan, New Zealand, Switzerland or European Union nations that were members as of Jan. 1, 2003. Pharmacists and wholesalers that reimport prescription drugs would have to register with FDA; pay fees of as much as 1% of the price of the medications to fund the cost of additional federal inspectors and customs agents; and track and document the chain of custody of medications from manufacturer to consumer (California Healthline, 6/17).
Rother said that the first step to alleviating the problem of prescription drug price increases is for Congress to pass the bill. He said the group's endorsement stems in part from the fact that the bill would punish drug companies who would seek to limit their supply of drugs to foreign nations to discourage reimportation, according to CQ Today (CQ Today, 6/30). "The closer we get to Election Day, the more powerful this issue becomes," Rother said (Long Island Newsday, 7/1). AARP board member Doug Holbrook said the group is supporting the reimportation bill because "Americans deserve better. ... While it's not a panacea, this is important" (CQ Today, 6/30).
In a separate survey released on Wednesday, AARP found that most Medicare beneficiaries have problems paying for prescription drugs. In a survey of 2,747 people, AARP found that about 35% of people older than 65 said that paying for drugs is "major problem," while another 36% said it was a "minor problem," the Sun reports. The survey also found that only 8% of participants said they had purchased prescription drugs from abroad, but most favored legislation to legalize reimportation (Baltimore Sun, 7/1). According to AARP, many seniors who do not experience problems with medication costs have prescription drug coverage or are not taking drugs (Long Island Newsday, 7/1).
NPR's "All Things Considered" on Wednesday reported on the study. The segment includes comments from Lori Reilly, deputy vice president for policy at AARP, and Rother (Silberner, "All Things Considered," NPR, 6/30). The complete segment is available online in RealPlayer.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.