Drug Cost Hike Linked to New Medicare Benefits

AARP suggests prices spiked after federal law signed

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HealthDay Reporter

WEDNESDAY, June 30, 2004 (HealthDayNews) -- The new Medicare drug benefit may have spurred the most recent hike in prescription medication costs for older Americans, a new report suggests.

Manufacturer prices for brand-name prescription drugs rose 3.4 percent, or nearly three times the general inflation rate, during the three-month period from Dec. 31, 2003, through March 31, 2004.

According to the report, released Wednesday by AARP, those increases came after President Bush signed the Medicare prescription drug benefit into law on Dec. 8, 2003. The discount drug cards only became available to seniors in June.

"We can't say for sure why it's happening, but there certainly seems to be an association," said David Gross, first author of the report and a senior policy advisor at the AARP Public Policy Institute in Washington, D.C. "It doesn't prove it, but it doesn't disprove it."

However, the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry group, disputed the findings and decried the "politics" of the new report.

"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 was signed into law in late 2003," Richard I. Smith, PhRMA's vice president of policy, research and strategic planning, said in a prepared statement.

"We urge AARP to put aside the politics of the moment and to turn its efforts to signing up as many seniors as possible for the Medicare-endorsed discount cards, which offer large discounts and, for low-income couples, up to $2,400 of extra help," Smith continued. "It would be counterproductive if AARP's current campaign leads seniors to forgo those large discounts and cash assistance."

After sampling brand-name drugs that are among the 200 most widely dispensed, the authors of the report also found the average annual increase in the cost of therapy due to manufacturer price increases for the 191 most widely used brand-name drugs to treat chronic conditions was $63.70 for the 12 months ending March 31 compared to $60.38 for the previous year.

PhRMA countered by saying that in 2003, prescription drug prices had increased at a lower rate than other health services, including hospital costs, which grew by 8 percent. It also stated that prescription inflation grew by 2.3 percent, about the same as overall medical care.

According to AARP, the typical older American taking three prescription drugs is likely to have experienced an annual average increase of $191.10 in the most recent 12 months, compared to $181.14 in the previous 12 months, if the drugs weren't generic and if the full price increases were passed to the consumer.

Not all drugs have increased equally, however. "Almost half of the drugs had no increase, but that meant the ones that did increase jumped more," Gross said.

In the December-through-March period, 58 drugs increased more than 5 percent in price, including 21 drugs that increased more than 7.5 percent.

Among the 25 brand-name drugs with the greatest 2003 sales, the highest percentage price change during the first quarter of 2004 was for Plavix, a blood thinner (7.9 percent).

There were eight Pfizer drugs within the top-25 group, and all had price increases, ranging from 2.9 percent for the cholesterol drug Lipitor to 6.4 percent for Neurontin, a seizure medication.

All four Bristol-Myers Squibb drugs among the top 25 had increases as well, ranging from 7 percent for its statin, Pravachol, to 7.9 percent for Plavix.

Only one of the three Merck drugs in this category -- Fosamax, an osteoporosis drug -- had a price increase (4.9 percent) during the first quarter of 2004. The painkiller Vioxx and the cholesterol-lowering drug Zocor did not increase.

Overall, more than half of the drugs surveyed, 106 out of 197, had price increases during the first three months of 2004. All of these increases were at least twice the rate of general inflation for that period.

What does it mean for consumers and their pocketbooks?

"It means they're more stressed," Gross said.

More information

View the report by visiting the AARP.

SOURCES: David Gross, Ph.D., senior policy advisor, AARP Public Policy Institute, Washington, D.C.; Pharmaceutical Research and Manufacturers of America statement; June 30, 2004, AARP issue brief

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