AARP: Costs of brand-name drugs outpace inflation

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Average annual increases in retail prices charged for widely used, brand-name prescription drugs have continued to consistently exceed the rate of general inflation, based on a report commissioned by the Association for the Advancement of Retired Persons (AARP).

This report, compiled by the AARP’s Public Policy Institute, presents annual and five-year cumulative price changes through the end of 2009, using both rolling average and point-to-point estimates.

In 2009, the average annual increase in retail prices for the 217 most widely used brand-name prescription drugs (8.3 percent) was notably higher than the rates of increase for retail prices in the prior five years, which ranged between 6 percent and 7.9 percent during the years 2005 to 2008, the association reported.

On average, the AARP said that the retail prices for 207 brand-name drugs that have been on the market since the beginning of the study (December 2004) increased 41.5 percent by December 2009, compared with the general inflation rate of 13.3 percent during the same period.

According to the report, the average annual cost for one brand-name medication was about $1,400 in 2009. For a consumer who takes three brand-name prescriptions on a regular basis, the average annual cost of therapy for the drug products used to treat chronic conditions rose by almost $1,900 between 2004 and 2009.

All but six of the 217 brand-name prescription drug products in the study’s market basket had retail price increases during 2009. All of these increases exceeded the rate of general inflation during the same time period.

All 26 drug manufacturers with at least two drug products in the study’s market basket of widely used brand name drugs had average increases in retail price that exceeded the rate of general inflation (-0.3 percent) in 2009. Eight manufacturers had average annual retail price increases of 10 percent or more during 2009.

AARP also found that all 35 therapeutic categories of brand name drug products had average annual retail price increases that exceeded the rate of general inflation in 2009, ranging from 3.3 percent to 19 percent.

“Drug price increases raise Medicare beneficiaries’ costs,” the report found. “Retail price increases translate into higher out-of-pocket costs for those beneficiaries who pay a percentage of drug costs (coinsurance) rather than a fixed dollar amount (copayment). Higher prices also push more Part D enrollees into the doughnut hole—the gap in coverage when enrollees have to pay all of their drug costs—each year. And, once in the donut hole, enrollees feel the full effect of the higher retail prices.”

For the report, the list of prescription drugs that are widely used by Medicare beneficiaries is based on the 300 most widely dispensed drug products (both generic and branded drugs), the 300 drug products with the highest sales levels, and the 300 drug products with the highest number of days of therapy provided among the prescriptions adjudicated by a Medicare Part D plan provider, according to the AARP. Each drug product also represents a unique combination of active chemical ingredient, strength, dosage form, package size and manufacturer.