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Brand-Name Drug Prices Continue to Soar: Report

But latest AARP survey finds cost of generics rising less than inflation

TUESDAY, Aug. 16, 2005 (HealthDay News) -- Prices for brand-name prescription drugs used by older Americans rose by more than double the rate of inflation between April 2004 and the end of March, continuing a years-long trend, according to the latest "Rx Watchdog Report" from AARP.

But there was also good news: For the first time, the report, released Tuesday, found the cost of generic drugs rose less than the inflation rate.

"We just wish the same kind of self-restraint could be true for the makers of brand-name drugs," said AARP policy director John Rother.

According to his group's report, manufacturer list prices for 195 of the most popular brand-name prescription drugs widely used by older Americans rose by 6.6 percent in the year covered by the survey, compared to an annual inflation rate of 3 percent.

Those statistics are in keeping with trends tracked by AARP over the past five years. The group estimates that the typical older Americans taking three prescription medications spend an average $866 more per year on these drugs now than they did in 2000.

"What we find is that these price increases are pretty much across the board -- it doesn't seem to make much difference what category of drug is involved or what manufacturer," Rother said. "Obviously, those people that are chronically ill, and particularly those who suffer from more than one chronic illness, they are getting hit pretty hard."

But not everyone agrees with the report's conclusions. Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA), which represents the drug industry, said in a prepared statement that the AARP report is based on the wrong statistics.

"AARP continues to use fuzzy math in reaching its flawed conclusions," Johnson said. "Their numbers simply do not reflect the true amounts paid by seniors for their medicines." His group's numbers estimate the 2004-05 rise in prices for prescription drugs is lower than increases for U.S. medical costs as a whole.

AARP releases its "Rx Watchdog Report" periodically in an attempt to track seasonal and annual changes in drug pricing for its 35 million members aged 50 and above. The group bases it figures on changes in the manufacturer's list price for their drugs -- the prices drug companies use when selling to wholesalers.

For this latest survey, which tracked prices from April 1, 2004, to March 31, 2005, AARP focused on 195 big-selling brand-name prescription drugs as well as 75 leading generic medications.

The group looked especially at price changes in the first quarter of 2005. During that three-month period, the increase in prices for brand-name prescriptions (5.9 percent) was the lowest seen since 2002 (5.7 percent), and substantially lower than that seen last year (7.7 percent), according to the AARP report.

Still, the survey estimated that the annual cost per patient for the average brand-name prescription drug rose by $48.05 between April 2004 and the end of March.

Many drugs posted sizeable price increases during the first three months of 2005, the AARP report said.

For example, prices for Pfizer Inc.'s cholesterol-buster Lipitor jumped by 5 percent, while costs for another statin medication, Bristol-Myer Squibbs' Pravachol, rose by 5.9 percent. Abbot's Aricept -- used to help slow the symptoms of Alzheimer's disease -- rose in price by 4.5 percent. The biggest jump in cost came for AstraZeneca's heart drug Toprol, which increased in price by 6 percent, according to the report.

Price increases were seen across almost all categories of drugs, the report found, with the biggest rise noted for antipsychotics, SSRI antidepressants, beta-blocker heart medications, and anti-infective agents.

"What we are seeing is a steady series of price increases for drugs," Rother said. "Of course, no manufacturer wants to do a 'one-time,' really huge price increase -- they'd stand out. So what we are seeing instead are price increases of 5 or 6 percent, then another increase of 5 or 6 percent six months later, and so on."

Rother is hopeful that the planned Medicare prescription drug benefit -- slated to take effect in January -- will provide at least partial relief to seniors. But, he added, "the consumer just doesn't have much in the way bargaining power" when it comes to drug pricing.

"It's a big problem -- these lifesaving drugs are becoming less and less affordable," he said.

The drug industry disagrees with Rother's assessment of the problem. The industry group says its calculations of ongoing changes in U.S. drug prices are based on data from the federal government's Consumer Price Index, which PhRMA believes more accurately reflects the cost of drugs at the retail level.

According to those statistics, prices for prescription drugs -- a mix of generics and brand-name products --- rose by just 2.6 percent between April 2004 and April 2005. That's less than the overall annual rate of increase for medical costs as a whole, pegged at 3.9 percent, PhRMA said.

"These numbers clearly show that prescription drug prices increased at a rate slower than overall medical care, which is good news for consumers," Johnson said.

But AARP countered that the wholesale numbers tell the real story.

"The manufacturer's charge to wholesalers is the most substantial component of a brand-name prescription's retail price," the report said. "When manufacturers increase their price to wholesalers for a brand-name drug, the added cost is generally passed on in the retail price."

The report does provide one silver lining for consumers -- almost no rise (0.7 percent) in the average cost of generic drugs over the 12-month period.

"That was a real surprise," Rother said. "Generic drug prices have been kept down substantially compared to previous years. I'm not sure I can explain that, but it's certainly good news for consumers and more reason than ever to switch to a generic drug if you have that option."

Rother also advised consumers to shop around for discounted brand-name drugs. "You'd be surprised to see the variation between one retail outlet and another," he said. And he urged Americans to take advantage of existing discount programs, some set up by retailers and others by drug companies themselves.

"Still, none of these discount programs can counteract the full impact of these price increases," Rother said. "Even with the discounts, these prices are hurting people."

More information

For more, visit AARP's Web site.

SOURCES: John Rother, policy director, AARP, Washington, D.C; Aug. 15, 2005, statement, Pharmaceutical Research and Manufacturers of America, Washington, D.C; Aug. 16, 2005, AARP report Trends in Manufacturer Prices of Brand Name Prescription Drugs Used by Older Americans -- First Quarter 2005 Update
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