updated 5/25/2004 4:28:23 PM ET 2004-05-25T20:28:23

Brand-name prescription drug prices rose at more than three times the rate of overall inflation last year, two groups pressing for lower prices said in studies Tuesday.

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The reports by the 35 million-member AARP and the consumer group Families USA said the gap between prices for prescription medicines and general inflation has widened in recent years, diminishing the purchasing power of older Americans who receive increases in Social Security based on the Consumer Price Index. The index is the government’s most closely watched inflation measure.

“If the price of drugs keeps going up faster than inflation, it will become more and more difficult for consumers, especially older consumers, to be able to afford them,” said John Rother, AARP’s policy director.

Increases negate value of drug-card discounts
The increases also negate the value of the discounts available through Medicare’s new drug cards, said Ron Pollack, president of Families USA. The group has been a persistent critic of last year’s Medicare prescription drug law.

“Over time, base prices have increased by a higher percentage than the discounts the administration is claiming,” Pollack said.

The Bush administration has said the Medicare drug cards are offering savings of 10 percent to 17 percent on brand-name drugs. The card can be used beginning June 1.

The average price increase for the top 30 brand-name drugs used by older Americans was 6.5 percent last year, the Families USA report said. AARP’s study showed an average 6.9 percent price increase for nearly 200 drugs. Inflation in general was 1.9 percent.

Since 2000, the drug prices have risen 27.6 percent, AARP said. General inflation was 9.3 percent for the same period.

Prices increased between 6.9 percent and 9.9 percent last year for the five leading drugs in terms of sales — cholesterol-reducing Lipitor, the blood thinner Plavix, Fosamax for osteoporosis, the blood pressure drug Norvasc and Celebrex, a pain reliever — the Families USA study said.

Pfizer makes Celebrex, Lipitor and Norvasc, while Bristol-Myers Squibb produces Plavix and Merck & Co. manufactures Fosamax.

Both studies looked at wholesale prices, reasoning that changes in those prices were reflected in costs at the retail level.

Industry cites R&D costs
Jeff Trewhitt, a spokesman for the Pharmaceutical Research and Manufacturers of America, said the studies overstated the rate of inflation for prescription drugs and did not account for the industry’s substantial research and development costs.

Prices of prescription medicines have risen 4.4 percent on average in each of the past three years, slightly slower than medical inflation, Trewhitt said. “That’s a more accurate basis for comparison,” he said.

The Bureau of Labor Statistics, which compiles the Consumer Price Index, said prescription prices rose by only 2.5 percent last year, but that measure also includes generic drugs. Stephen Schondelmeyer, a University of Minnesota professor of pharmaceutical economics and an author of the AARP report, said the government index was changed in the mid-1990s to minimize drug price increases.

The reports issued Tuesday excluded generic drugs, which make up roughly half of all prescriptions written in the United States, but only about 10 percent of the dollar value, Schondelmeyer said.

Use of generics urged
Administration officials have been urging Medicare beneficiaries to consider using cheaper generics when they fill their prescriptions. Visitors to the Medicare drug price comparison Web site can opt to receive information on generic equivalents to their brand-name drugs.

AARP is planning an examination of generic drug prices.

The seniors group is widely credited — or blamed — for providing an endorsement last fall that was critical to the Medicare legislation’s passage.

However, AARP has been waging a campaign to bring down the cost of drugs, including lobbying for changes in the newly enacted law. Among its proposals are legalizing imports of prescription medicines from Canada, allowing the government to negotiate Medicare drug prices with pharmaceutical companies and getting drug makers to agree to limit price increases to the rate of inflation.

Left unchecked, the prices of brand-name drugs could undermine the Medicare prescription drug benefit that begins in 2006, Pollack said.

After the first year, insurance premiums, deductibles and the gap in coverage that lawmakers built into the program all will rise in line with the increase in Medicare’s drug costs.

“As Medicare’s drug costs go up — and rising drug prices will play a large role in any increases in Medicare’s costs — so will seniors’ prescription drug expenditures,” the Families USA report said.

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