BRAND DRUG PRICES OUTPACING INFLATION, SAYS AARP

Brand drug manufacturers increased wholesale prices for drugs most commonly used by Americans 50 and older at more than twice the rate of inflation from April 2004 to March 2005, according to an AARP report.

However, drug prices seem to be rising more slowly than in prior years, especially generic drug prices, which remained virtually flat, indicates the AARP's "Trends in Manufacturer Prices of Prescription Drugs Used by Older Americans," released recently.

The AARP tracked price changes for the 12 months ending March 2005, and for the first three months of 2005, for the 195 brand drugs and the 75 generic drugs most widely used by older Americans. Brand drug prices rose 6.6 percent in the year ending March 2005 - more than twice the 3 percent rate of U.S. inflation, but less than prior increases of 7.1 percent in 2004 and 7 percent in 2003. Conversely, generic drug prices rose only 0.7 percent during the year ending March 2005, but that followed much larger price hikes in 2001 (7.8 percent), 2002 (15.8 percent) and 2003 (13.3 percent).

Twenty-one of the 25 top-selling brand drugs in 2003 saw prices increase between 2.9 and 6 percent in first quarter of 2005. Seven other brand drugs reviewed by the AARP saw price increases of a whopping 7.9 percent to 9.5 percent. Generic drugs saw fewer increases but higher price hikes. Only three generic drugs in the study saw price increases in the first quarter of 2005, but their prices increased 6 percent.

Despite earlier price hikes, in 2004 the average price of a generic prescription was $28.74, while the average price of a brand name drug was $96.01, a difference of $67.27 per prescription, the Generic Pharmaceutical Association noted in its glowing response to AARP's report.

PhRMA spokesman Ken Johnson, on the other hand, slammed the report's "fuzzy math," citing a July 2005 paper by the American Enterprise Institute that argues the prescription drug consumer price index is a more accurate measurement of drug prices than the wholesale acquisition cost used by the AARP in its studies. "The methods used by the AARP ... to measure trends in drug prices have serious limitations," the AEI paper says. "Wholesale prices do not incorporate the discounts that are commonly offered by prescription drug manufacturers, and they do not reflect the savings that consumers can realize by careful shopping."