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Drug Price Increases Triple the Rate of Inflation

Cost of brand-name medications jumped 6.9 percent in 2003, study finds

TUESDAY, May 25, 2004 (HealthDayNews) -- Prices for the most popular brand-name medications used by older Americans increased at three times the rate of inflation last year, claims a new AARP study.

"That's a pretty substantial increase," said study co-author Steven W. Schondelmeyer, head of the department of pharmaceutical care and health systems at the University of Minnesota.

The study, released Tuesday, measured changes in the prices that drug manufacturers charged wholesalers over a four-year period starting in the year 2000. The authors said the underlying price fluctuations are significant because they affect the actual prices seniors pay at their local drugstore or by mail.

"These price increases typically pass straight through to the consumer," Schondelmeyer said.

Prices for widely used brands rose 4.1 percent, on average, in 2000, and 6.9 percent in 2003, while inflation fell from 3.3 percent to 2.2 percent over the same period, the report said.

And the average cost to consumers for top brands nearly doubled from 2000 to 2003 -- rising from $33.76 to $60.38, the authors estimate. This means the typical older American who takes three drugs would have paid $101 more in 2000 and $181 more in 2003 if the higher prices were passed along, AARP noted.

When it came to individual brand names, a 10-milligram dose of the cholesterol medication Lipitor rose 6 percent in 2003, almost triple the 2.2 inflation rate that same year. A 75-milligram dose of the blood thinner Plavix rose 7.8 percent each year covered by the study.

Large increases were also seen in estrogen drugs and thyroid medications, checking in at 10 times and six times the rate of inflation, respectively, in 2003.

Pharmaceutical Research and Manufacturers of America, the brand name drug industry's lobbying group, did not respond to a request for comment on the findings.

AARP's Public Policy Institute tracked prices for the top 200 drugs used by seniors, based on both annual sales volume and the number of prescriptions dispensed each year. The analysis yielded a combined list of the 291 most widely used drugs, including 197 brands -- the focus of this report.

At some future date, AARP said it intends to issue a separate report examining price changes for the top 94 generic drugs used by seniors.

The new report is the latest step in a larger campaign by the senior citizen advocacy group to put pressure on the pharmaceutical industry to lower drug prices. The effort comes in the wake of sharp criticism of AARP leaders for supporting last year a Medicare prescription drug benefit program that bars the federal government from negotiating lower prices from drugmakers.

As part of that legislation, seniors may take advantage of a new drug discount card program effective June 1. Federal Medicare officials say the program will give cardholders price breaks averaging 11 percent to 18 percent off average retail prices. But critics of the program say the discounts are meaningless if drug prices continue to escalate.

"The new prescription benefit in Medicare was an important step, but our members have made it clear that they want AARP to continue to push for affordable drugs," AARP Chief Executive Officer Bill Novelli said in a statement.

Earlier this year, AARP asked the pharmaceutical industry to hold its price increases to the rate of general inflation. The new data provide a benchmark against which to monitor the industry's future performance, the group said.

Overall, the new prescription drug report showed the average rate of growth in manufacturers' drug prices has accelerated in recent years, said study co-author David J. Gross, a senior policy adviser with AARP's Public Policy Institute.

On a cumulative basis, prices for the 155 brand-name drugs on the market for the entire four-year period rose 27.6 percent, on average. That compares with a general inflation rate of 10.4 percent for the four-year period, the report said.

Only four drugs had price increases below the four-year average rate of inflation, according to the report.

The rapid price increases for estrogens and thyroid hormones may be due to the fact that few generics have cropped up to compete against these drugs, the study authors said.

These medications have been on the market since World War II, noted Schondelmeyer, who suspects drugmakers are raising prices to reflect current pricing trends. "They're drugs that have not had the same kind of generic competition that we see (elsewhere)," he added.

Also Tuesday, AARP unveiled a new quarterly report to consumers on prescription drug prices. The "Rx Watchdog Report" will update consumers on drugmaker activities, their pricing policies, quarterly profits and spending on lobbying and advertising, the group said.

More information

Read AARP's report to learn more about trends in manufacturers' brand name drug prices. Or visit the U.S. Centers for Medicare and Medicare Services to find out about Medicare's drug discount card program.

SOURCES: David J. Gross, senior policy adviser, AARP Public Policy Institute, Washington, D.C.; Steven W. Schondelmeyer, Pharm.D., Ph.D., professor, pharmaceutical management and economics, head, department of pharmaceutical care and health systems, and director of Prime Institute, College of Pharmacy, University of Minnesota; May 25, 2004, AARP report, Trends in Manufacturer Prices of Brand Name Prescription Drugs Used by Older Americans, 2000 Through 2003
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