Information and Resources

Brand Rx Prices Rise Another 6.3%

Sept. 19, 2006 -- Wholesale prices for popular brand-name drugs rose 6.3% between June 2005 and June 2006, a study released by the seniors' group AARP concluded Tuesday.

That's nearly double the rate of general inflation.

The increase translates to an average of $283 dollars in additional drug costs for Americans over 50, who on average take four prescription medications. Most of the prescriptions are for chronic, ongoing conditions, the report says.

The study looks at wholesale prices that drug makers charge distributors, not retail prices paid at the pharmacy. But AARP, the nation's largest and most powerful senior citizens' lobbying group, warned that such price increases are passed along to consumers, many of whom lack insurance.

"We can't imagine a system in which wholesalers are eating these cost increases," Dalmer Hoskins, managing director of the AARP Public Policy Institute, told reporters.

Prices Outpace Inflation

The study looks at 193 of the most commonly used drugs by Americans over 50. Prices for more than 70 of the drugs went up 3% to 5% between June 2005 and June 2006. Fifty-eight drugs rose 5.1% to 7.5%, while three rose 10% or more.

At the same time, manufacturers' prices for generic drugs rose 0.4%, a fraction of the 3.8% inflation rate, the report showed.

The study marks the seventh straight year the organization has recorded wholesale prices outpacing inflation.

The Pharmaceutical Research and Manufacturers of America (PhRMA) was sharply critical of the AARP study. Ken Johnson -- PhRMA's senior vice president -- says in a news release that "AARP's allegations about pharmaceutical inflation are inaccurate."

According to Johnson, "The allegation about drug inflation ... is soundly contradicted by studies that show that prescription medicine spending increases are at their lowest level in a decade."

Wholesale Prices and Medicare

It is unclear how the wholesale price increases would affect spending by millions of seniors who have private insurance or Medicare Part D prescription drug coverage. Medicare officials said earlier this month that while premiums for outpatient medical services will go up next year, they expect prescription drug plan premiums to remain the same on average.

David Certner, AARP's chief legislative counsel, says increasing drug prices help raise the overall cost of health care across the board. Four million AARP members lack health insurance and must pay out of pocket for their drugs or seek charity help from drug companies if they qualify.

Some seniors with high drug costs may soon confront Medicare Part D's $2,250 coverage limit, also known as the "donut hole." Beneficiaries who surpass the limit must pay all of their drug costs until they reach $5,100 in annual spending.

"These [increases] are being built into the health costs people are paying, one way or the other," Certner says.