Wholesale Price Increase Coincides With Drug Benefit Launch
The wholesale prices of brand-name prescription drugs increased 3.9% in the first quarter of 2006, the largest quarterly increase since 2000, according to a study released on Tuesday by AARP, the AP/Arizona Daily Star reports (Freking, AP/Arizona Daily Star, 6/21). Families USA released a separate study finding that the median price of the top 20 drugs prescribed to patients ages 65 and older increased by 3.7% from mid-November 2005 to April 17, while the average wholesale price rose by 3.8% (Gerencher, Dow Jones Newswires, 6/20).
Both groups said the findings show that the Medicare prescription drug benefit, which took effect during the study period, is doing little to curb increases in medication costs and might be contributing to drug price inflation, the New York Times reports (Freudenheim, New York Times, 6/21).
CMS on Tuesday released data showing that prices for prescription drugs used by Medicare beneficiaries with chronic conditions increased 3.6% from December 2005 through this month, while average wholesale price increased 4.1% (Carey, CQ HealthBeat, 6/20).
The AARP study examines the wholesale prices of 197 brand-name and 75 generic medications (AP/Arizona Daily Star, 6/21). According to the study, the price drug manufacturers charge for brand-name drugs increased 3.9% during the first three months of this year. The increase in brand-name drug prices was four times the rate of general inflation over the same period, the study finds (New York Times, 6/21).
For the 12-month period ending March 31, brand-name prices rose an average of 6.2%, compared with a general inflation rate of 3.5%, the study finds (CQ HealthBeat, 6/20). According to AARP, the price increases mean that for a typical senior who takes four prescriptions daily, average drug costs rose about $240 over the 12-month period ending March 31 (New York Times, 6/21).
However, CMS Administrator Mark McClellan said that most Medicare beneficiaries have more protection from increases in wholesale medication prices than other consumers. AARP "didn't look at the whole picture," he said.
The study finds that the sharpest increase was for the sleep medication Ambien, the price of which rose 13.3%. The cost of the treatment had increased 20% in the previous year. The study finds no cost increase for generic medications (AP/Arizona Daily Star, 6/21).
Using data submitted to CMS by Medicare drug plans, the Families USA study examines prices from mid-November 2005 to April 17 for the 20 medications most commonly prescribed to seniors. According to the study, median drug prices rose 3.7% during the study period, while the average wholesale price increased 3.8%.
The median price of five of the 20 drugs did not increase under the majority of Medicare drug plans, although the price of some drugs increased for some plans and fell for others, the study finds. The AWP increased more than 6% for the pain medication Celebrex, the cholesterol treatment Lipitor and the Alzheimer's disease drug Aricept, according to the study.
The study also compares prices paid by Medicare and those paid the Department of Veterans Affairs -- which, unlike Medicare, negotiates drug prices with manufacturers. According to the study, the VA pays a lower price than Medicare for each of the 20 drugs, with a median difference of 46% between the VA price and the lowest price paid by Medicare drug plans.
For one year's supply of the cholesterol treatment Zocor, the lowest VA price was about $127, compared with about $1,275 for the lowest Medicare drug plan price, the study finds (Dow Jones Newswires, 6/20).
John Rother, policy director at AARP, said, "When the manufacturers' wholesale prices increase, it gets passed through the system, regardless of who the final purchaser is" (New York Times, 6/21). Rother said the findings reverse "some indications last year that price increases were moderating." He added, "The issue isn't the Medicare drug program. The issue is prices throughout the health care system" (AP/Arizona Daily Star, 6/21).
Ron Pollack, executive director of Families USA, said, "This means that Part D plans are doing essentially nothing to contain the fast-rising prices by the drug industry," adding, "Either the plans have been highly ineffective in moderating price increases or the (pharmacy benefit managers) are negotiating discounts with the drug companies and not passing them on to America's seniors. There should be some accountability in terms of what discounts these plans are getting and what they're holding onto." Pollack said that Medicare should be able to directly negotiate drug prices with pharmaceutical companies.
CMS spokesperson Peter Ashkenaz said comparing VA prices to Medicare prices is like comparing "oranges to apples." Ashkenaz said, "The VA has a tighter formulary (than Medicare), and it doesn't include many of the VA's pharmacy costs. Plus, most of the VA's prescriptions are by mail order, and seniors and disabled (on Medicare) in a lot of cases prefer to buy their drugs from the local pharmacy" (Hundley, St. Petersburg Times, 6/21). He added that many Medicare drug plans charge "flat copays, which protects [beneficiaries] from changes in pricing."
In addition, Medicare beneficiaries can obtain "personalized help in finding less costly drugs," Ashkenaz said (New York Times, 6/21).
The AARP report on brand-name drugs is available online.
The AARP report on generic drugs also is available online.
The Families USA report is available online.
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