Prescription drug cost increases continuing to outpace inflation

Dec 6 2004

A new report released today by AARP found the annual rate of manufacturers' price increases for the 197 brand name prescription drugs most commonly used by older Americans more than tripled the rate of inflation over the 12-month period ending on September 30, 2004.

As part of an ongoing series of AARP studies, Trends in Manufacturers Prices for Brand Name Drugs Most Commonly Used by Older Americans -- Second and Third Quarter 2004 Update reported that manufacturers' prices increased 7.4 percent, on average, from September 2003 to September 2004. The rate of general inflation during that same 12-month time period was 2.3 percent.

"While millions of Americans struggle to afford the medications they need, it is very disturbing for prices to increase at such a high rate," said AARP CEO Bill Novelli.

"Prescription drug affordability is an enormous challenge not only for our members, but to employers, insurers, state drug assistance programs, Medicaid budgets, 44 million uninsured and millions more who lack adequate drug coverage," Novelli said.

Earlier this year, AARP asked drug manufacturers to hold back price increases to the rate of inflation or less. But the latest AARP report finds very few are doing their part.

More than 80 percent of the drugs in the AARP sample -- 161 of 197 -- had increases in manufacturers' prices during the period from December 31, 2003 through September 30, 2004. Nearly all of these increases exceeded the rate of inflation during the same nine-month period.

According to report co-author David Gross of AARP's Public Policy Institute, "The good news is that the average manufacturer price increase through the first nine months of the year -- 5 percent -- is the lowest rate since 2001." This lower rate is partially attributable to an average price increase of only five percent for the three-months between July and September 2004. While these months correspond to the introduction of Medicare drug discount cards, this pattern of lower manufacturer price increases after the first quarter of the year is quite consistent with previous years.

"Nevertheless, the year-to-date increase for 2004 is still nearly double the rate of inflation for the first nine months," Gross added.

For most consumers these types of increases are not sustainable. Seventy- one-year-old AARP member Rosemarie Cola said, "My husband and I spend over $5,000 a year out of our own pockets for prescription drugs. It's not easy to make ends meet when drug prices keep going up so dramatically."

"AARP is engaged in a prescription drug affordability campaign that is using litigation, legislation and consumer information to help lower prices. Regular price studies and a special publication "AARP Rx Watchdog Report," are helping to expose industry pricing practices to our members and all consumers," explained Novelli.

In a separate study of the Medicare drug discount card program referred to in the latest "Rx Watchdog Report," AARP's Public Policy Institute describes how prices for 227 drugs vary among 33 national Medicare-approved discount cards.

The drug discount card report also shows how prices vary among pharmacies under each card, how retail pharmacy prices vary compared with mail order prices, and how some cards consistently offer lower prices than other cards.