Drug Prices Rose 7.4 Percent On Widely Used Meds
10 CommentsBy Ed Silverman // March 4th, 2008 // 4:59 pm
Drug makers increased their prices last year by an average of 7.4 percent for brand-name meds most commonly prescribed to the elderly, and the increase was about 2.5 times the overall inflation rate, according to AARP, which released the report and has been tracking prices charged to wholesalers since 2002.
In discussing the findings, AARP notes the price increases have been slightly greater since the Medicare drug benefit began Jan. 1, 2006, the Associated Press reports. In the four years before the benefit, wholesale prices rose between 5.3 percent and 6.6 percent annually, according to AARP. This is the study.
AARP officials say the outcry over high drug prices has diminished since the Part D benefit was created. “Unfortunately, many manufacturers have taken the absence of an outcry as a green light to go ahead and raise prices even more,” John Rother, AARP’s policy director, tells the AP.
All but four of the 220 brand-name prescriptions in the study had price increases during 2007, and nearly all exceeded the rate of general inflation. Among the top 25 drug products, Sanofi-Aventis’ Ambien sleeping pill had the largest price increase at 27.7 percent. By comparison, Bristol-Myers Squibb’s Plavix blood thinner had a price increase of 0.5 percent. Please click on ‘Read More’ below, to see the chart for the increases on the 25 most widely prescribed meds.
The manufacturer’s wholesale price is the most substantial component of a prescription drug’s retail price. However, insurance companies, such as those that cover Medicare beneficiaries, typically negotiate confidential rebates from the manufacturer, and the plan’s customers benefit. Plans could potentially negate a higher wholesale price by negotiating a steeper discount or by lowering their reimbursement rates to pharmacies, the AP notes.
Still, a change in the wholesale price generally results in a similar percentage change in the price of most prescriptions, AARP said. UPDATE: PhRMA belatedly sent us this statement: “AARP’s numbers simply do not reflect the true amounts that seniors pay for their medicines. And they do not reflect the clear downward trend in prescription drug price growth. National healthcare projections released by the Centers for Medicare & Medicaid Services just last month estimated that growth in prescription drug spending declined 1.8 percentage points in 2007, a deceleration ‘directly related to drug price growth, which is expected to decelerate 2.1 percentage points to 1.4 points.’”
While the AARP’s report focused on higher prices for brand names, federal health officials note that more people are taking generics, and that trend has accelerated as a result of the Medicare drug benefit. Plans use tools, such as lower co-payments for generics, to steer consumers to lower-priced meds. Government economists say that about two-thirds of all prescriptions now are generics.
“That’s been the good-news story,” Rother tells the AP. “The plans have done what we hoped they would do, which is shift people to lower-cost generic drugs. However, savings from people shifting to generics are being offset by these higher prices for brand names.”
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Pharmalot » Drug Prices Rose 7.4 Percent On Widely Used Meds…
AARP’s Public Policy Institute finds that price increases for brand name drugs have far outstripped the price increases for other consumer goods and services between 2002 and 2007; this is consistent with the pattern that we have seen since initiating…
MDB
Big pharma can’t rip any other countries off because they’re are price controls in most areas. So, they rip off America instead!
harry harrinordiquy
“Big pharma can’t rip any other countries off because they’re are price controls in most areas. So, they rip off America instead!”
well, the other way of looking at that is that the US funds global R&D and subsidises other markets because they arent willing to invest sufficiently in healthcare.
These AARP reports need to be placed in perspective - they measure list prices and not the ‘real’ price paid, which factors in discounts. Companies need to keep list prices high because the US remains a popular reference country in other markets like Canada, japan and South Korea. It’s the real price that counts and AARP tells us nothing about that
Atlex
This study has huge flaws. The two drugs among the top 25 with the greatest increases (Ambien and Norvasc)are both available generically. Thus, the vast majority patients (>90%) on either drug experienced a cost decrease of 50% to 80%. AARP intentionally ignores this so it can grab headlines. Not only do the headlines help AARP to advance its political agenda, it also stands to benefit financially since it has a financial interest in the largest Medicare drug plan. Thus, if it can force prices lower, the plan that it is associated with stands to profit.
Mark Post
‘Atlex’ makes an excellent point. Furthermore, AARP and their litigation division appear to be two faced cowards in the following affair, which was brought to their attention last year. Dr. C.E. Haley, a medical director of Trailblazer Medicare, improperly denied access to therapy (via denied funding) for Ibandronate i.v. (Boniva) on label for osteoporosis patients. This may have caused injury, pain, disability, and in some cases death for large numbers of beneficiaries. He was reversed in a fully favorable decision for our patient by the Administrative Law Judge in Florida. No thanks to AARP. Trailblazer has gained enhanced power and controls additional states since then.
Grieving
I guess AARP still has a guilty conscience for supporting the drug bill, after which I gave up my membership forever. However, it is true the Phrmas raise prices whenever and wherever they can. After all the bad publicity over Zyprexa, Lilly’s atypical antipsychotic that killed my son (and is now killing children and seniors with dementia off label) sales dropped. So what did Lilly do? Well, of course, they raised the price.
Jack2
I agree with Atlex.
Plus, the average increase on all the drugs is nearly a useless number. The increase should be weighted by sales. A price increase on a drug with total sales of $50 million shouldn’t count as much as an increase on a drug that sells for $1 billion. The chart lists the 25 most frequent drugs. Did the study weigh their data by sales?
Bob Freeman
Jack2 and Atlex, agree with both of you that the methodology is flawed and, at best, is more of a qualitative trend.
It is also important to remember that rebate contracts with Managed care organizations and wholesalers’ ability to anticipate price increases means that the manufacturer cannot realize the price increase until contracts expire or wholesalers deplete their stocks.
On a 3% increase, I would guess that perhaps 1.6% is actually booked in the near-term.
Ed Silverman
Hi Everyone,
I have reached out to AARP’s John Rother, and a press person there, several times by e-mail and phone today and, unfortunately, I’ve not yet received a reply. I also invited him to post a comment. It’s still possible he will respond. I’ve dealt with Rother numerous times over the years and, like you, I am curious to see what, if anything comes back in the face of the comments several of you have made.
Regards
ed
Ed Silverman
The AARP has responded. This is what John Rother, the policy director, wrote me this morning:
“This probably deserves a more detailed rebuttal, but as an overall response I would say the ‘anonymous’ critic is completely off base.
The drugs analyzed were very carefully selected to be the ones both heavily prescribed. The inclusion of those with generic substitutes just makes the point about how marketing still seems to dominate competition on price. Patients on those two branded drugs experienced cost increases, not decreases, because we used most commonly prescribed as our selection basis. Of course, we promote generic substitution. The industry hasn’t offered a persuasive explanation of why branded drugs whose patents expire have their prices increased.
AARP does not consider financial impact on the United Healthcare Part D plan in any of our policy work or analysis. Anyone who knows us understands that there is a firewall between our policy operations and anything that produces revenue. We believe prices should be ‘forced’ lower, not to increase United’s profit, but to make drugs and the Part D premiums more affordable.
The ‘anonymous’ critic seems to take the position that simply documenting price increases is somehow a self-interested activity. On the contrary, we believe that prices of pharmaceuticals in the U.S. are too high by any standard, certainly in comparison to prices elsewhere, and that these price trends are unsustainable if continued. Putting pressure on the industry to explain its pricing behavior is, we believe, in the public interest. We await a more constructive and substantive response.”
Again, this was sent to my own e-mail by John Rother, the AARP policy director. And I posted his remarks with his knowledge.
Thoughts anyone?
Regards
ed