Drug Prices Rose 8 Percent Last Year: AARP
8 CommentsBy Ed Silverman // August 25th, 2010 // 8:16 am
The retail prices for the 217 most widely used brand-name drugs rose an average of 8.3 percent last year, despite a drop in inflation, according to a new survey by AARP. And for the most popular meds, prices rose 41.5 percent, outpacing a 13.3 percent rise in the Consumer Price Index. The results were first reported in The New York Times and here is the complete survey.
However, the findings may not match reality for many Americans who take lower-cost generics, according to John Vernon, an assistant professor of health policy at the University of North Carolina who consults for drugmakers. “It can easily be shown that branded prices are higher here than they are in other countries, but we have the lowest and the most competitively priced generic drugs in the world, and the generic share is going up rapidly,” he tells the paper. “Just focusing on brands I think is unfair.” A different survey by the US Bureau of Labor Statistics found prices rose 3.4 percent last year.
John Rother, AARP’s executive vp for policy and strategy, agrees that generic prices held stable or declined, but the new analysis, nontheless, showed that many older Americans may have difficulty paying for needed brand-name meds. The AARP, by the way, conducts a pricing survey each year, but this was the first time the group relied on retail, not wholesale pricing. In the past, AARP was criticized for its methodology, because manufacturer rebates were not included.
The AARP, as the Times writes, found overall increases of 8.3 percent in 2009, 7.9 percent in 2008, 7 percent in 2007, 6.1 percent in 2006, when Medicare drug benefits started, and 6 percent in 2005. The Bureau of Labor Statistics reported increases for the same years of 3.4, 2.5, 1.4, 4.3 and 3.5 percent, although these included prices for generics.
The biggest price hike was claimed by Boehringer Ingelheim’s Flomax incontinence pill with a 24.8 percent rise to $4.09, according to AARP. The generic equivalent sells for $3.63 on drugstore.com. Meanwhile, prices rose 6 percent, to $5.40 a day, on AstraZeneca’s Nexium; 8.8 percent, to $5.06 a day, for the Plavix bloodthinner sold by Bristol-Myers Squibb; 7 percent, to $5.50 a day, on Prevacid from Takeda; 6.8 percent, to $4.21 a day, on Protonix from Wyeth; and 4.1 percent, to $4.03, on Lipitor 20-milligram tablets from Pfizer.
Other interesting details: the retail prices for widely used brand-name meds rose by more than the inflation rate for all drugmakers last year, with Boehringer Ingelheim leading the pack at 18.4 percent; and all therapeutic categories had retail price increases that exceeded inflation, and the average annual retail cost for the most widely used brand-name meds was almost $1,400 last year.
Also, the five-year cumulative percent change in retail price was 92 percent for the Nexium, the brand-name med with the largest percent price hike last year, and that retail price for a one-year supply of Nexium 40 mg capsules was $1,971 by the end of 2009, an increase of $414 from the end of 2004.
Rick
The explanation of John Vernon, professor of health policy, defies logic. If branded-drug utilization is going down, that represents a decline in demand. That should put downward pressure on pricing. He argues that it explains why prices have gone up. Makes no sense to me, just sayin’.
shytown
I was in a high level meeting at a Big Pharma Co. when Med Part D was rolled out to the country.
The higher ups were laughing about the deal saying any discount given today will be made up for, and then some, on the back end with price increases.
This was, in my opinion, one of the biggest Sweat-Heart deals ever given to Big Pharma.
Who says lobbyists don’t earn their pay?
anonymous
While branded demand has gone down, there has been no need change from pharma meaning they still need the same amount of money to feed the marketing bureaucracy beast and Wall Street.
Not believing that they can compete on price and volume, they don’t decrease price but increase it to make the same amount with less profits. Pharmas rarely succumb to market pressures.
Adam J. Fein
A footnote on page 19 of this report highlights a serious bias with the analysis:
“In order to measure the impact of changes in retail price alone, the weights for drug products in this market basket are fixed over time. Drug products that enter the market as generics after 2006 will not be included in this index.”
In other words, the branded price is included in the computation even if the drug went generic during the past 4 years. This analysis completely ignores the substitution effects and is meaningless when compared to a proper price index.
But hey, why read footnotes when it’s easier just to mindlessly bash pharma companies.
pharmavet
People need to understand that there are basically two types of inflation, “regular” inflation” and health care inflation. Health care costs have been and will continue to rise at an annualized rate of 6-8% across ALL health care sectors, no matter what cost controls the government puts in place. This is why it is advisable, for example to purchase an inflation adjusted Long Term Care insurance policy. Without such a rider, I can be expected to pay approximately $296,000/year for Assisted Living for one year in my state. When I doubted these numbers as presented to me, I graphed the past, present and projected curves for the rising cost of LTC, and my broker was pretty much correct.
I don’t like high health care costs anymore than anyone else. But please, please, do not believe the myth of “bending the cost curve downward” in any segment of health care. That is a political fairy tale that health care economists of all stripes believe will never happen.
doc
Plavix price increased 8.8% in 2009, vs the inflation rate of -.3%. This drug is not optional in patients with cardiac stents and even now has no real competition (Lilly’s Effient is almost 20% higher in cost).
BMS has held pay increases to zero for all employees for two years and could very likely go with zero again for 2010.
It is arrogance and greed to increase prices to this degree in this economic environment.
Senior executive bonuses at BMS have suffered little.
Justice in MI
Sorry if I’ve told this story before. I know a guy who can realistically claim to be World Number One in his subspecialty in opthy. He’s had three stents and refused Plavix, relying instead on the anti-platelet aggregation properties of gingko and curcumin. All I can say is that he’s still ticking. Personally, I would not be so “adventurous.”
Anyway, aside from those who are, what is the answer? Insurance plans pass on the increased cost to employers who, in turn, pass it on to patients via plans with larger co-pays and more restrictive benefits.
And. of course, those who do not have insurance or who have lost it are either independently wealthy or toast.
pharmavet
Matthew Herper explains why:
http://blogs.forbes.com/matthewherper/2010/08/25/five-reasons-branded-drug-prices-will-keep-rising/?partner=yahootix