Study: Drug Prices Outpace Inflation
Price Increases Undermine Medicare Discount Card
By Marc Kaufman and Bill Brubaker
Washington Post Staff Writers
Tuesday, May 25, 2004; 1:54 PM
The price of name-brand prescription drugs most used by seniors has increased by rates substantially above inflation for the past four years, undercutting the potential value of the new Medicare drug discount card, two senior advocacy groups reported today.
In a study tracking the prices of 197 of the most widely used brand-named drugs from 2000 to 2003, the group AARP found a cumulative increase of 27.6 percent as compared to a general inflation increase of 10.4 percent.
Analyzing the prices of the top 30 name-brand drugs prescribed for seniors, Families USA found an increase on average 4.3 times greater than inflation between January 2003 and January 2004.
The AARP report also found that the price escalation has picked up during the past four years: About one quarter of the most-used name brand drugs more than doubled the general inflation rate in 2000, while 87 percent of those same drugs doubled the inflation rate in 2003.
The price increases raise the politically sensitive question of how much seniors will really save by using the Medicare cards, which have promised discounts of up to 25 percent for brand-name medications when they go into effect on June 1.
Earlier this year, Health and Human Services Secretary Tommy Thompson dismissed suggestions that the value of the Medicare discount cards would be significantly eroded by drug company price increases and said that all seniors who use the care will benefit financially. But Ron Pollack, executive director of Families USA, said today that the drug cards will give little or no help to most seniors because of the price increases.
"It's the functional equivalent of going to a used car salesman and being told you're getting a great deal because you got a $3,000 discount," he said. "Only before you came, he raised the price of the car by $4,000."
As the nation's overall drug budget has increased by double-digit rates in recent years, the Pharmaceutical Research and Manufacturers of American has said most of the increase is the result of greater use of prescription drugs rather than inflation in drug prices.
A spokesman today said the organization is analyzing the two new reports to determine whether they are accurate and whether they take into account the sometimes large discounts that manufacturers give to major suppliers of prescription drugs.
Because those discounts are considered confidential business information, they are not made public and so cannot be analyzed. Both AARP and Families USA said they used the published price manufacturers charge to wholesalers to make their comparisons.
According to Families USA, the price of the five most prescribed drugs for seniors increased at an especially fast rate last year. Lipitor, used to lower cholesterol, rose 5.5 times more than inflation; blood-clot preventer Plavix increased 5.3 times inflation, osteoporosis drug Fosamax increased 4.6 times inflation, blood-pressure medication Norvasc increased 6.6 times inflation and arthritis drug Celebrex rose by 5.4 times inflation.
And the price increases appear to be continuing. Last week, for instance, Merck & Co. Inc. acknowledged that it increased the price of arthritis medication Vioxx 4.8 percent on March 31.
Earlier this year, the AARP asked the drug industry to hold its price increases to the general rate of inflation. The group, which was strongly criticized by many members and Medicare advocates for its support of the Bush administration prescription drug plan, said its top priority this year is to lower prescription drug costs.
John Rother, AARP's director of policy and strategy, said the price hikes are negating the value of the discounts offered by the Medicare cards. Assuming the cards offer a 20 percent discount, he said, "it's clearly true that the discounts really just offset the last three years or so of price increases."
Pollack of Families USA said the price increases are a particular burden to the many seniors who won't have the Medicare discount cards. The Bush administration has estimated that only one in six seniors will actually get the cards.
Sen. Edward Kennedy (D-Mass.) said the new reports show that the discounts cards will be of little use to most seniors. "Seniors need a real break, along with the rest of America, but they won't get one as long as this administration panders to big drug companies that overcharge for their prescription drugs," he said.
© 2004 The Washington Post Company