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Health Care Reform:

Health Insurance & Affordable Care Act

AARP Says Prices Increase at Double the Inflation Rate; Drug Industry Says Study Is Flawed

WebMD Health News

Prices for Brand-Name Rx Drugs Up 6.1%

Nov. 2, 2005 -- Price hikes for nearly 200 popular prescription drugs showed signs of slowing for the second straight year, though the cost of drugs still continues to grow at twice the rate of inflation, according to a report released Wednesday.

An annual study released by the seniors' group AARP showed that average wholesale prices for the 193 brand-name drugs most often used by the elderly rose 6.1% between June 2004 and June 2005. The increases are less than the 7.1% annual rise reported for the same period in the previous year.

The latest rise translated to drug bills $32.38 higher than in the previous year for the average person over 50 years of age. That's less than half of the $62.71 average rise seen in 2003, according to the report.

But the 6.1% price increase was still more than double the 3% inflation rate, prompting the group to criticize drugmakers for pricing their products further and further out of the reach of seniors on fixed incomes.

"This is a pretty dramatic level of total price increases," John Rother, AARP's director of policy, tells WebMD.

Drug Industry Responds

The drug industry's main trade group challenged the study. The Pharmaceutical Research and Manufacturers of America (PhRMA) released a statement calling AARP's report "flawed" and arguing that consumer prices for prescription drugs actually rose more slowly than prices for other consumer products between June 2004 and June 2005.

"The U.S. government's publicly available consumer price data over the past few years clearly show that prescription drug prices increased at a rate slower than overall medical care, and much slower than other goods that Americans rely on every day," Ken Johnson, a PhRMA spokesman, says in a statement.

Seventy-five generic drugs studied by AARP showed no changes in manufacturers' prices during the second quarter of 2005, and just three showed price increases during the first quarter of the year, the study showed.

Medicare Reforms and Drug Prices

Rother points out that annual price increases rose sharply in 2003, the same year Congress passed Medicare reforms that included the Part D prescription drug benefit. That benefit is due to begin open enrollment on Nov. 15 and to begin offering benefits Jan. 1, 2006.

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