Prescription Drug Prices Soaring Above Inflation

Last year's 7.1 percent rise is largest over the past 5 years, AARP says

Steven Reinberg

Steven Reinberg

Updated on April 12, 2005

TUESDAY, April 12, 2005 (HealthDayNews) -- The cost of most popular, brand-name drugs used by older Americans has risen by 7.1 percent in the past year -- a new record, according to an AARP report released Tuesday.

On a brighter note, the report finds the rising cost of generic prescription drugs appears to have slowed or leveled off. The price of 75 of the most widely used generic drugs rose by just 0.5 percent in 2004.

"For brand-name drugs, we are still seeing that, on average, manufacturers are raising their prices much faster than the rate of inflation, about 2.5 times the rate of inflation," said study author David Gross, a senior AARP policy advisor.

The annual report describes changes in the prices of prescription drugs in 2004 for 195 brand-name drugs widely used by Americans over 50 years of age. The average price increase during 2004 was 7.1 percent, while the general inflation rate was 2.7 percent, making the price hikes the largest in any of the past five years.

But in a statement released Tuesday, the Pharmaceutical Research and Manufacturers of America (PhRMA) said prescription drug price hikes have been lower than overall medical price increases since passage of the Medicare Modernization Act, between November 2003 and December 2004.

The PhRMA-funded study said consumer health-care costs reflected in the Consumer Price Index rose 4.7 percent, while prices for prescription drugs were up 4 percent during the same period. The PhRMA statement called the Consumer Price Index "a more reliable measure than the Wholesale Acquisition Cost (WAC) measure used by AARP" because WAC "only reflects wholesale list price changes on a select group of name brand drugs."

The AARP study found that all but one of the 25 top-selling drugs saw price increases that were greater than the inflation rate. The price of 16 of these drugs increased at more than double the rate of inflation.

Ten-milligram tablets of the sleep medication Ambien charted the highest percentage increase, at 11.9 percent, the report found. The lowest price increase was 1.5 percent for allergy medicine Flomax, for 0.4-milligram capsules. Twenty-milligram tablets of Prilosec -- an acid reflux drug now available as a generic and over the counter -- was the only product in the Top 25 not to increase in price during 2004.

Gross said that, by 2004, the average annual cost of taking the painkiller Celebrex had risen by $173, compared to its cost per year in 1999. For 20-milligram tablets of the cholesterol-buster Zocor, that five-year rise in cost totaled $338, and for 75 milligram doses of the blood thinner Plavix, it reached $417, he said. For 0.3 milligram doses of Premarin -- used to ease menopause symptoms -- the five-year cost increase of $200 marked a 150 percent price hike from the year 2000, Gross said.

"You have these price increases year after year after year, and the average older person is taking three drugs, sometimes many more. If they don't have insurance, they are paying a lot more -- the cost is going up faster than their income," Gross said.

For people who have insurance, these price increases mean increased premiums or reduced coverage, Gross said.

While the price of brand-name drugs keeps going up, price increases for generic drugs have eased, Gross said. "Last year, the average was about a 13.3 percent increase in price. This year the average price increase is 0.5 percent," he said.

Of the 75 generic drugs looked at in the study, most prices remained unchanged in 2004, Gross noted. But given the fact that one expects the price of generic drugs to drop, "I was more surprised by the 13.3 percent increase last year than by the 0.5 percent this year," he said.

What the future holds is not clear, Gross said. "It is possible that the rate of increase is slowing," he noted.

Gross is concerned about how price increases will affect the Medicare drug plan. He said he wouldn't speculate on why prices are going up at such alarming rates, but did note that drug costs are the leading cause of cost increases in all health care. "Drug costs have been growing faster than other health-care costs," he said.

The AARP expert also said many believe drug companies are raising their prices in anticipation of the new Medicare drug benefit plan, scheduled to go into effect in 2006.

"These prices are still increasing, and we need some pressure to bring them down," Gross said. "A year ago, when the Medicare drug bill passed, we challenged drug manufacturers to keep their increases at the rate of inflation. For the most part, they haven't done that."

AARP isn't pleased the Medicare drug bill forbids the government to negotiate prices with drug companies, he added. "We would like to see the government have the power to do that," Gross said. "But we are going to have to see how effective the plans are in reducing price."

Still, like so many consumers, Gross said he is left with one unanswered question for drug companies: "Why do they have to raise their prices 2.5 times the rate of inflation when they have already done the research and development for these drugs?"

One public health expert stressed that pharmaceutical companies have their side of the argument, too. "While the AARP's concern is valid, the legitimacy of their veiled indictment of the pharmaceutical industry is harder to judge," said Dr. David L. Katz, an associate clinical professor of public health and director of the Prevention Research Center at Yale University School of Medicine.

Katz said many top-selling pharmaceuticals have been withdrawn due to problems found only after the drugs have been on the market. "The cox-2 inhibitor class of anti-inflammatories is representative," he said, referring to the withdrawal of prescription pain relievers Vioxx and Bextra after studies linked the drugs to increased cardiovascular risk; Celebrex remains on the market. "Not only does this strip revenue from drug makers, but it exposes them to class-action litigation," he said.

In addition, part of the cost of drugs is the return on drug company investment needed to support research and development and maintain America's edge in innovation, Katz added.

"Are drug companies charging too much?" Katz asked. "And in particular, are they gouging the nation's seniors by outstripping the pace of inflation with their price hikes? Without full access to Big Pharma's spreadsheets, and both sides of this argument, there is no way to know."

But Katz admits that "the cost of drugs causes many seniors to be noncompliant with their treatment regimens, compromising their health."

"Whatever the legitimacy of drug pricing, we need public policy to shield seniors from costs they cannot bear, and health threats they shouldn't have to," he said.

More information

AARP can tell you more about prescription drugs.

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