AARP: Drug Prices Jumped in Early 2004

Jul 1, 10:23 AM EDT
AARP: Drug Prices Jumped in Early 2004

By MARK SHERMAN
Associated Press Writer

WASHINGTON (AP) -- Even after the new Medicare law promised billions of dollars in government spending on prescription drugs, makers of best-selling medications raised prices quickly, nearly triple the rate of inflation, an AARP survey found.

Pharmaceutical companies increased the prices they charge drug wholesalers for the top 200 brand-name drugs an average of 3.4 percent in the first three months of 2004, while inflation in general was 1.2 percent, according to the survey AARP released Wednesday.

It covered the period after the new Medicare law was enacted and just before the Bush administration began its pharmacy discount card program.

The administration says the drug cards are offering Medicare recipients 11 percent to 18 percent savings on brand name drugs, but AARP said the price increases offset some of the promised savings and demonstrate anew the need to legalize cheaper drug imports from Canada and elsewhere. Drug companies and the administration oppose that move, citing safety concerns.

"It's disappointing that prices jumped after the legislation was signed, after they had assurances that they'd have a broader market to sell to," AARP policy director John Rother said.

The law is estimated to cost $395 billion to $534 billion over 10 years, much of it directed to prescription drug purchases by older and disabled Americans that the government has not previously paid for.

Most of the top 10 selling drugs increased more than the average, led by Bristol-Myers Squibb's Plavix. The price of the blood thinner increased by 7.9 percent, AARP said.

Merck and Co. raised the price of Fosamax for osteoporosis by 4.9 percent, while the most popular forms of Celebrex, a pain reliever, and cholesterol-reducing Lipitor - both made by Pfizer - increased by 5 percent and 4.6 percent, respectively.

"Manufacturers are offsetting discounts with prices that are higher than they otherwise would have been," Rother said at a news conference held by the 35 million-member seniors' group.

The price increases also diminish the purchasing power of older Americans whose Social Security income goes up at the much slower pace of inflation.

The Medicare card program began in June, although companies started advertising their prices in late April.
Under the program, companies that offer the discount card negotiate lower prices with drug companies and pharmacies.

Medicare beneficiaries can buy the cards for up to $30 and get discounts on drugs they purchase at neighborhood pharmacies or by mail order. Poor people get the cards free, plus $600 a year to fill their prescriptions. Several drug companies will provide their products at little or no cost once that aid is exhausted.

Prescription drug coverage through Medicare begins in 2006, replacing the temporary card program.

Mark McClellan, the administration's Medicare chief, said in an interview that people who use the cards are seeing significant savings. "None of our beneficiaries should be paying anything close to list prices for drugs, and more help is available than ever before," McClellan said.

Since the program began - after the price increases - the lowest prices available with a discount card have been essentially unchanged for Celebrex, Fosamax and Lipitor, three-best selling drugs that The Associated Press has been tracking.

All can be bought at roughly the same prices through the online pharmacy drugstore.com and for much less in Canada.

AARP gave crucial backing to the new Medicare law, but has been a vocal critic of pharmaceutical manufacturers and their congressional allies who have resisted legalizing drug imports. The seniors group also has urged drug makers to limit price increases to the rate of inflation, to no avail.

Rother singled out Bristol-Myers and Pfizer, which between them produce 12 of the 25 top-selling drugs. Bristol Myers-Squibb prices rose 7.2 percent, while Pfizer increased its prices 4.8 percent in the first three months of 2004, AARP said.

Pfizer spokeswoman Laura Glick acknowledged the prices went up, but said those are annual increases that typically occur in January. "And that doesn't include mandatory government discounts and other negotiated discounts," Glick said. "We are committed to responsible pricing."

Bristol-Myers spokesman Rob Hutchison said the company spends an average of $800 million on each new drug it develops. "The prices of our innovative medicines reflect the research needed to discover and develop them," he said.

Despite the increase in Fosamax, Merck & Co. showed average price increases of 1.6 percent. It has acknowledged raising the price of the painkiller Vioxx by 4.8 percent in March. AARP showed no increase in the price of Vioxx, but said the higher price shows up in its April data.



The newly passed legislation is working it is helping those it was intended to. The pharmaceutical industry. That was it's purpose or was it?