AARP keeps finger on Rx prices

MMR, April 24, 2006

WASHINGTON -- Wholesale drug prices are rising faster than the rate of inflation, according to a report from AARP.

"Prices for brand name drugs have jumped 40% on average over the past six years, compared with inflation of only 17%," says John Rother, AARP director of policy and strategy.

Rother contends that the price increases charged to wholesalers are generally passed along and affect the prices that consumers pay.

"Brand name drugs have become substantially less affordable for consumers at the same time they are becoming ever more essential to good medical care," he says. "These prices are reflected both in higher premiums for drug coverage as well as in higher out-of-pocket costs at the pharmacy counter."

The good news in the AARP report was the finding that the average brand name drug increase in 2005 was substantially lower than the rates of increase in 2003 and 2004, and slightly lower than that of 2002. AARP found that wholesale prices for a sample set of 193 brand name drugs rose 6% in 2005, while inflation over the 12 months was 3.4%. AARP's study for 2004 reported a 7.1% average increase in wholesale drug prices.

AARP's "Rx Watchdog" studies, which it has been conducting for the last six years, have come under fire from industry groups and other critics in the past. Last year the Pharmaceutical Research and Manufacturers of America (PhRMA) pointed to research suggesting that prescription drug price inflation has been in line with overall medical inflation since January 2000.

An analysis of the government's consumer price index (CPI) showed that drug prices increased at an annual rate of 4.1% from January 2000 to February 2005, while the annual rate of medical inflation during the same period was 4.4%.

PhRMA's study contended that using the prescription drug CPI "is a more reliable measure than the Wholesale Acquisition Cost (WAC) used by AARP because WAC only reflects wholesale list price changes on a select group of brand name drugs. The prescription drug CPI is the most accurate publicly available measure of what consumers actually pay."

The CPI includes a mix of brand name and generic drugs, according to PHRMA, and also reflects discounts offered by drug makers, product distribution costs and retail pharmacy markups.