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Brand-Name Drug Prices Rising, Says AARP

But Drug Industry Says Numbers Are Misleading

WebMD Health News

April 12, 2005 -- An AARP report shows 195 brand-name prescription drugs widely used by older people rose in price by 7.1%, on average, in 2004.

That's based on drug makers' wholesale list price, which may not reflect what any particular person paid for the drugs. And a drug industry spokesperson says the numbers don't accurately reflect what people pay.

The AARP survey also covered manufacturer list prices for 75 generic drugs. Sales of those drugs rose slightly (0.5%) in 2004, says the AARP, a nonprofit group formerly called the American Association of Retired Persons.

Drug Industry Group Responds

AARP is "comparing apples to oranges," says Jeff Trewhitt, spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA).

He says a better way to track drug prices is to use the Consumer Price Index, which tracks a mix of brand-name and prescription drugs. The drugs on the CPI's list aren't necessarily the same as those AARP followed.

"We firmly believe that the Consumer Price Index maintained and updated by the Bureau of Labor Statistics has the most up-to-date, accurate data," Trewhitt tells WebMD. He says the AARP's numbers don't take into account rebates, discounts, and other adjustments made to the drug manufacturers' wholesale prices.

AARP's Numbers

Manufacturers' wholesale list prices for brand-name prescription drugs have outpaced general inflation for five straight years, says the AARP. America's general inflation rate for 2004 was 2.7%, according to the federal government's CPI.

Only one of the brand-name drugs tracked -- Prilosec 20 mg -- had no change in manufacturer price in 2004, according to the AARP.

Of the other 194 brand-name drugs, 143 rose in makers' wholesale list price by more than 5%, 46 rose by 7.6%-10%, 35 increased by 10%-15%, and eight rose by more than 15%, says the AARP.

Among 75 generic drugs studied, three had a manufacturers' price cut. Price hikes were seen in 16 generic drugs, nine of which outpaced the general inflation rate. The other 56 generic drugs had no change in list price, says the AARP.

From November 2003 to December 2004, the CPI's drug costs rose 4%, says Trewhitt. He says that's lower than the 4.7% overall medical inflation rate noted by the CPI.

"The prescription drug CPI is the most accurate publicly available measure of what consumers actually pay," says Trewhitt, quoting a study commissioned by PhRMA.

"The prescription drug CPI reflects the full range of factors that typically affect retail prices, including wholesale costs, discounts manufacturers negotiate with distributors or other customers, product distribution costs (i.e., getting the product to the pharmacy), pharmacy mark-ups, and dispensing fees (i.e., pharmacy costs)," says the report by Milliman, Inc.

Wallet Impact

What does all that mean to a patient at the pharmacy counter? It depends whom you ask.

If someone took three prescription brand-name drugs from the AARP's list and absorbed the full amount of cited price increases, they would have paid $154.68 more, on average, in 2004, says the AARP.

PhRMA sees it differently. Besides disputing the AARP's method, Trewhitt says many people take generic drugs, as well as brand-name medications.

"Consumers typically utilize a mix of brand and generic medicines as part of their normal course of treatment," says a PhRMA news release.

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