Higher Prices Erode Value of Medicare Cards

The prices of the brand-name prescription medications most used by senior citizens have climbed much faster than overall inflation in the last several years, a trend that undercuts the impact of the new Medicare drug discount card that takes effect next week, two consumer groups charged yesterday.

In a study tracking prices of 197 of the most widely used brand-name drugs from 2000 to 2003, AARP found a cumulative increase of 27.6 percent, compared to a general inflation rate of 10.4 percent.

In a separate analysis of prices of the top 30 brand-name drugs prescribed for seniors, Families USA found an average increase 4.3 times greater than the rate of inflation between January 2003 and January 2004.

Both studies examined prices charged to wholesalers, mail order firms and other groups that buy directly from drug manufacturers.

"The clear picture is that prices have been going up a lot, and we don't have any reason to believe these increases are not being passed on to consumers," said David Gross, co-author of the AARP study.

The price hikes raise the politically sensitive question of whether seniors will pay any less for medications this year with the Medicare cards, which promise discounts of up to 25 percent for brand-name drugs. All told, 73 cards are being offered by groups such as AARP and companies such as CVS Inc.

Medicare beneficiaries can use the cards to get reduced prices from retail or mail-order pharmacies. The program will disappear Jan. 1, 2006, when a more comprehensive drug benefit is implemented as part of the Medicare law passed by Congress in December.

Ron Pollack, executive director of Families USA, said yesterday the value of the discount cards has been significantly eroded by the price hikes.

"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."

John Rother, who directs AARP's office of policy and strategy, agreed. "The discounts are important and significant," he said. "But, mapped against this pattern of price increases, the discounts really just offset the last three years of price increases."