Medicine prices up despite reform

Some drugs rise more than 3 times inflation rate

Discounts are offset, AARP says

July 01, 2004|By William E. Gibson | William E. Gibson,SOUTH FLORIDA SUN-SENTINEL

WASHINGTON - Despite government attempts to help senior citizens cope with the high cost of medicine, average wholesale prescription drug prices are rising at about three times the rate of inflation, according to an AARP study released yesterday.

The increases came just before Medicare began its pharmacy discount card program, negating much of the savings the government promised to seniors, AARP said.

The new Medicare law establishing the drug benefit, which AARP supported, has done nothing to discourage steep price increases, the group found after reviewing the top 197 brand-name drugs used by patients 50 and older.

The price increases have further fueled anger about the high cost of drugs, an important issue in the 2004 elections. They also have prompted senior-citizen advocates to demand new legislation that would allow drugs to be imported from Canada and other countries to give consumers a cheaper alternative.

Average prices rose 7.2 percent in the 12 months that ended in March, a time when the general inflation rate was only 2 percent, according to AARP's "Rx Watchdog Report."

In the first quarter of this year, wholesale prices for the most widely prescribed drugs rose 3.4 percent on average, compared with a 0.5 percent increase for all wholesale prices, excluding food and energy, based on the AARP report and Labor Department statistics. That's nearly three times the inflation rate of 1.2 percent.

Merck and Co. Inc. raised the price of Fosamax for osteoporosis by 4.9 percent, while the most popular forms of Celebrex, a pain reliever, and cholesterol-reducing Lipitor - both made by Pfizer Inc. - increased by 5 percent and 4.6 percent, respectively.

"At the same time, the very same drugs are selling at 30 percent or even 50 percent less in Canada and overseas," said Douglas C. Holbrook, an AARP board member. "Is it surprising that so many of our own citizens are looking outside our borders in order to afford their prescription drugs?"

In response, the Pharmaceutical Research and Manufacturers of America issued a statement asserting that price increases are in line with inflation in the medical industry and that drugmakers are investing in developing new medicines.

"Government data ... show that the prices of medicines have increased at an equal rate to other health care services since the Medicare bill was signed into law in late 2003," the industry association said.

Began June 1

The card program, part of the Bush administration's overhaul of Medicare, began June 1, although companies started advertising their prices in late April.

The Bush administration says the average savings on brand-name drugs is 11 percent to 18 percent for discount card holders.

The program has come under heavy criticism for being too complicated and not delivering enough savings.

AARP, which gave crucial backing to the new Medicare law, has been a vocal critic of pharmaceutical manufacturers and their congressional allies who have resisted legalizing imports of prescription medicines from Canada and elsewhere. The seniors group also has urged drugmakers to limit price increases to the rate of inflation, to no avail.

AARP pushed hard for enactment of the new law, although it does not allow importation of cheaper drugs and includes a provision that prevents Medicare from using its power to negotiate lower drug prices.

Faced with a backlash from Democrats and many of its members, AARP is pressuring drugmakers to keep costs down while lobbying states to bargain for lower drug prices.

The giant advocacy group for older Americans said all along it would work to "improve" the new law, and it is throwing its considerable power behind a bill to allow importation.

The close scrutiny of drugmakers includes quarterly reports on prices. The reports measure the selling price to wholesalers, which in turn affects retail prices.


"It's clear that some manufacturers were very aggressive and raised prices very substantially, and others did not," said John C. Rother, AARP policy director.

"The concern we have is that the manufacturers are offsetting discounts with prices that are higher than they otherwise would have been. It's particularly disappointing to see these prices jump after the legislation was signed, after they had the assurance that they would have a broader market to sell to.

" ... Unless they are prepared to exercise more self-restraint, I think the Congress and American public are going to entertain additional steps to keep these prices affordable."

The South Florida Sun-Sentinel is a Tribune Publishing newspaper. The Associated Press contributed to this article.

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