Brand Name Drug Prices Rose 4 Percent

Brand-name drug prices jumped nearly 4 percent during the first three months of the year, raising costs for taxpayers subsidizing the Medicare drug program and for some of those participating in it, AARP said Tuesday.

AARP, an advocacy group for senior citizens, said the quarterly increase was the largest since 2000. Pharmaceutical companies said the increases were in line with overall medical inflation.

In a separate report, Families USA said insurers participating in the Medicare program passed on the increase for 19 of the top 20 drugs that lead in sales.

"Part D plans are doing essentially nothing to contain the fast-rising prices by the drug industry," said Ron Pollack, the executive director of Families USA, a health advocacy group that has been a frequent critic of the program.

Mark McClellan, the Bush administration's point man for the drug benefit, said most Medicare beneficiaries actually have greater protection from increases in wholesale prices than do other consumers.

For example, McClellan said, many beneficiaries selected plans in which they pay a fixed amount for a drug, say $20 for a brand-name drug, and that price won't change during the year no matter what wholesale prices do. The poorest of beneficiaries are particularly protected from such increases because their payments are capped at $5 for a brand-name drug.

"They didn't look at the whole picture," McClellan said.

He acknowledged, however, that the increases would hit Medicare beneficiaries who have not yet fulfilled their deductible and those paying a percentage of drug costs rather than a set co-pay.

AARP surveyed the wholesale price of 197 brand-name and 75 generic drugs. While brand-name drugs increased 3.9 percent during the first three months of the year, there was no change in the cost of generic drugs, the group said. The Medicare plans emphasize generic drugs.

The Pharmaceutical Research and Manufacturers of America said drug prices had increased by 1.6 percent from January to May. It did not differentiate between brand-name and generic drugs.

"Experts consistently tell us that AARP's numbers simply do not reflect the true amounts paid by seniors for their medicines," PhRMA Senior Vice President Ken Johnson said in a statement.

Johnson said the Centers for Medicare and Medicaid Services had actually reduced its estimate of the cost of the drug program.

Families USA said the median wholesale price for the top 20 drugs prescribed to seniors rose by 3.8 percent from Nov. 15 to mid-April.

AARP said the overall trend was disturbing.

"We had hoped and saw some indications last year that price increases were moderating," said John Rother, the group's policy director. "What we saw in the first three months of this year was the biggest jump in prices in six years."

The sharpest increase was reported for 5 milligrams of the sleep medication Ambien, which rose 13.3 percent. The increase is on top of a 20 percent rise in the drug's costs the year before.

"The issue isn't the Medicare drug program," Rother said. "The issue is prices throughout the health care system."

However, backers of the drug benefit have repeatedly said that insurers and pharmaceutical benefit managers are experts at negotiating the best drug prices for their customers. The Bush administration favors giving them the power to negotiate prices for beneficiaries rather than the government itself.

Families USA said its study counters the notion that insurers and benefit managers can do a better job than the federal government in negotiating prices. For each of the top 20 drugs prescribed to seniors, it found that the lowest price listed by a Part D plan was higher than the lowest price secured by the Veterans Affairs Department. The median price difference was 46 percent.

For Zocor, the popular cholesterol-lowering drug, the lowest annual VA price was $127.44, while the lowest price submitted by a Part D plan was $1,275.36, the advocacy group said.

"When Congress prohibited Medicare from bargaining for cheaper drug prices, it created a huge windfall for the drug companies and unaffordable prices for America's seniors," Pollack said.

The federal government issued its own analysis Tuesday of what rising wholesale prices mean for Medicare beneficiaries. It said wholesale prices for drugs used to treat chronic conditions went up 4.1 percent from December 2005 to June 2006. The plan prices for the same drugs went up 3.6 percent.

Coupled with large discounts, "this price stability translates into substantial and reliable savings for beneficiaries through Medicare drug coverage," the report from CMS said.