Firms extol the savings in Medicare drug cards

May 28, 2004|By Cyril T. Zaneski | Cyril T. Zaneski,SUN STAFF

WASHINGTON - Drug manufacturers fired back yesterday at consumer advocates who claim that inflated pharmaceutical prices have eroded savings for Medicare beneficiaries under a new government-sponsored discount prescription program.

The Pharmaceutical Research and Manufacturers of America, a Washington-based trade group, said seniors using a Medicare discount drug card would save 21 percent at retail pharmacies and 26 percent on mail-order prices for the 30 top-selling brand-name drugs studied by the health-care advocacy group Families USA.

Rick Smith, the drug association's senior vice president for policy, told reporters that Families USA was discouraging needy seniors from enrolling in the discount card program, which starts Tuesday. The Bush administration is hoping to enroll at least 7.4 million seniors for discount cards. "It saddens me if people don't enroll ... because they're getting bad information that these programs are not worthwhile," Smith said.

But Ron Pollack, executive director of Families USA, said his group's study looked at price inflation for the past three years, during which drug prices rose nearly 22 percent, on average.

"Drug price increases since Bush took office have risen beyond discounts that the administration said were possible with the cards," Pollack said in an interview.

The Bush administration's Medicare drug benefit figures to be a key domestic issue in the November election. Drug pricing will also be the focus of debate on Capitol Hill in coming days when the Senate is expected to consider bipartisan legislation that would legalize the importation of lower-price drugs from Canada and other industrialized nations.

Because of price controls, prescription medicine can be purchased for half as much in Canada as in the United States.

Families USA and AARP, the nonpartisan group that represents seniors and also released a study this week targeting drug-price inflation, are backing legalized importation of lower-price drugs as a means of restraining domestic drug spending.

The AARP study showed the manufacturers' prices for 197 medications most commonly prescribed for seniors rose 27.6 percent the past four years, almost triple the rate of inflation for other manufactured goods. The Families USA study showed prices for 30 top-selling drugs rising more than four times the inflation rate last year and 21.6 percent since January 2001.

Drug makers and the Bush administration maintain that importing drugs would have a minimal impact on domestic pharmaceutical prices while opening the borders to potentially dangerous counterfeit drugs. Moreover, they argue, importing drugs from countries that control prices would undermine the free-market American economy that encourages pharmaceutical research and development.

"Canada has a price-control system; it's that simple," Smith said. The United States has "market-based pricing that rewards innovation." Overall, Smith said, studies critical of pharmaceutical pricing are off track because they compare drug prices with those for consumer goods instead of with overall health-care costs. Drug price increases are in line with those for medical services.

But AARP analysts said comparing drug price increases with those of other manufactured goods is fair because pharmaceuticals are manufactured products. The primary driver of health-care price increases is the labor cost, they said.

Pharmaceutical spending represents about 10 cents of every health-care dollar.

Smith argued that critics who single out the acceleration of drug prices in recent years are ignoring that medications can reduce spending on hospitalizations and visits to physicians. Thus, he said, drug pricing gets singled out for rising while other spending declines.

Rising even faster than drug prices are copayments that insurers and health plans charge beneficiaries for medicine, Smith said.

A PhRMA study released this week showed that insurance co-payments for prescription medicines were increasing at 1.6 to 4.7 times the rate of retail drug price increases. The lower rate of co-payment increase was for people buying generic drugs, the higher for those who buy brand names. Co-payments that had long lingered at $10 or less have soared in recent years to $75 or more for the most popular medications.

"It's time," Smith said, "for a broader discussion of health-care issues."

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