Generic drugs are still a good buy

Nov 4 2004

A new AARP study found that manufacturers' prices for some generic drugs experienced a rapid rise over the past three years. However, these increases would have added only a few dollars per year to consumers' costs for any one of these products.

The study, from AARP's Public Policy Institute (PPI), was based on changes in manufacturers' list prices -- prices set by manufacturers for sales to wholesalers and other direct purchasers -- for 75 generic drugs widely used by Americans age 50 and older.

"Even if the increases were passed on to consumers, generic drugs are still a good buy," said report coauthor David Gross, a senior policy advisor for PPI. The report indicated that, while many of the generic drugs in the sample had high percentage increases in manufacturer list prices, more than half showed no price increase or showed price decreases. Also, because the price of a generic drug is usually low to start with, the value of these increases was just a few dollars per drug on an annual basis.

The report, conducted by AARP in conjunction with the PRIME Institute of the University of Minnesota, is part of AARP's "Watchdog" initiative on prescription drug pricing. AARP is waging a campaign to make prescription drugs more affordable. The generic drug study monitored the changes in manufacturers' list prices from 2001 through 2003.

Some other highlights from the study include:

• Almost half of the 75 drugs monitored showed no manufacturer list price increase at all in the three years.
• Five drugs monitored showed a decrease in manufacturer list price over the three-year period.
• The biggest decline among the top 25 selling generic drugs occurred for Ivax Pharmaceuticals' calcium blocker verapamil. For a 240 mg tablet of the hypertension treatment, the manufacturer list price declined an average of 21 percent annually over the three years.
• The biggest increase among the top 25 selling generics was for Ivax Pharmaceuticals' diuretic hydrochlorothiazide. The average annual increase over the three years for a 25 mg tablet was 58 percent.
• For 64 drugs in the sample used to treat chronic conditions, the average cost is skewed by large declines in the price of four drugs. When the four drugs are taken out of the mix, the impact of manufacturer price changes was an increase in the average cost of therapy by $3.12 per drug in 2001 and $2.33 in 2003. The average increase for 2002 remained at $8.

Previous Rx Watchdog Reports tracked changes in manufacturers' prices of the 197 most commonly prescribed brand name drugs from 2000 through 2003 and found that average price increases also outpaced inflation. The next Rx Watchdog, to be released in December, will look at second and third quarter 2004 prices.

The full Watchdog Report can be found at, http://research.aarp.org/health/2004_06_drugprices.html