[Ip-health] Drug Prices Up Sharply This Year

[Joana Ramos]

NY Times
http://www.nytimes.com/2006/06/21/business/21drug.html?_r=1&th&emc=th&oref=slogin


<snip>

> Some health care economists said the price increases, if they
> continued, could have a devastating effect on the new Medicare drug
> program.
>
> "Higher drug prices may lead to higher premiums next year, which may
> discourage enrollees from joining or staying in the program, and fewer
> enrollees could drive premiums even higher," said Stephen W.
> Schondelmeyer, a University of Minnesota economist who specializes in
> drug industry issues.
>
> Mr. Schondelmeyer said one clear indication of the inflation's impact
> could be seen among the six million low-income elderly and disabled
> people who previously received drug coverage through Medicaid but were
> automatically switched to the Part D program when it began in January.
>
> That shift was a windfall for drug makers, he said. "Medicaid would
> have paid 25 to 30 percent less under the old system, including
> rebates from the manufacturers, than the new Medicare Part D program
> is paying."

June 21, 2006
Drug Prices Up Sharply This Year
By MILT FREUDENHEIM

Prices of the most widely used prescription drugs rose sharply in this
year's first quarter, just as the new Medicare drug coverage program was
going into effect, according to separate studies issued yesterday by two
large consumer advocacy groups.

AARP, which represents older Americans, said prices charged by drug
makers for brand-name pharmaceuticals jumped 3.9 percent, four times the
general inflation rate during the first three months of this year and
the largest quarterly price increase in six years.

Price increases for some of the most popular brand-name drugs were much
steeper; the sleeping pill Ambien was up 13.3 percent, and the
best-selling cholesterol drug, Lipitor, was up 4.7 to 6.5 percent,
depending on dosage.

Over all, AARP said, higher prices mean that the cost of providing
brand-name drugs to the typical older American, who takes four
prescription medicines daily, rose by nearly $240 on average over the
12-month period that ended on March 31.

"When the manufacturers' wholesale prices increase, it gets passed
through the system, regardless of who the final purchaser is," said John
Rother, the policy director of AARP. Although the drug industry's main
trade association challenged the accuracy of the AARP survey, a separate
study, by Families USA, a patient advocacy group, found similar
inflation rates among brand-name drug prices. While the higher prices
have a general impact on the drug-taking public, consumer advocates said
the higher prices have special implications for Medicare, which Congress
barred from negotiating prices with drug makers when lawmakers devised
the new so-called Part D drug program.

Commercial insurers, which are offering the drug insurance plans under
Medicare's auspices, do have negotiating power. And they say that by
switching to generic drugs, consumers can avoid most of the price
increases.

The surveys measured manufacturers' wholesale prices, which would not
necessarily reflect any discounts insurers might be able to negotiate.

But even so, the price increases in the Medicare drug plans since they
began were identical in many cases with the jump in wholesale prices,
Families USA said.

Some health care economists said the price increases, if they continued,
could have a devastating effect on the new Medicare drug program.

"Higher drug prices may lead to higher premiums next year, which may
discourage enrollees from joining or staying in the program, and fewer
enrollees could drive premiums even higher," said Stephen W.
Schondelmeyer, a University of Minnesota economist who specializes in
drug industry issues.

Mr. Schondelmeyer said one clear indication of the inflation's impact
could be seen among the six million low-income elderly and disabled
people who previously received drug coverage through Medicaid but were
automatically switched to the Part D program when it began in January.

That shift was a windfall for drug makers, he said. "Medicaid would have
paid 25 to 30 percent less under the old system, including rebates from
the manufacturers, than the new Medicare Part D program is paying."

Ron Pollock, the executive director of Families USA, offered another way
to gauge the federal impact. The federal Department of Veterans Affairs,
which is able to negotiate prices with pharmaceutical makers, is paying
46 percent less for the most popular brand-name drugs than the average
prices posted by the Medicare plans for the same drugs, Mr. Pollack said.

Peter Ashkenaz, a Medicare spokesman, said enrollees in the Part D
program could obtain a broad range of drugs as well as "personalized
help in finding less costly drugs." He said many enrollees were in drug
plans with "flat co-pays, which protects them from changes in pricing."

The first quarter of the year is typically the time when drug makers
make many of their annual price increases. The industry did not comment
on this year's increases, other than to question the accuracy of the
AARP survey.

The drug industry's trade group, the Pharmaceutical Research and
Manufacturers Association, said in a statement that the AARP conclusions
were "erroneous," because consumer drug prices had increased less than 2
percent since Jan. 1. The group, though, was citing a federal Bureau of
Labor Statistics report that combines prices for brand-name and
lower-priced generic drugs, as well as various "medical supplies."

Paul Fitzhenry, a spokesman for Pfizer, which makes Lipitor, pointed the
finger at health insurers, which he said were increasing their drug
payment charges to members faster than drug makers were raising their
prices.

"There has been a huge disconnect between changes to our prices and
increases to consumers' out-of-pocket costs for medicines," he said.
"Between 2001 and 2005, our compound annual average net price increase
was 3.3 percent per year. During that same time, the average co-payment
charged by insurers for brand-name pharmaceuticals has increased at an
annual rate of 11.1 to 15.5 percent," he said, citing a Kaiser Family
Foundation 2005 survey.

Mohit Ghose, a spokesman for the American Association of Health Plans, a
insurance trade group, said the insurers were actually reducing drug
spending increases by promoting lower-cost generics instead of
brand-name drugs.

Mark Green, a spokesman for Sanofi-Aventis, which makes Ambien, said the
drug was "priced more competitively than some other products in the
sleep category." He added, "We make every effort to price our prices
competitively, relative to the value they provide to patients."

--
Joana Ramos, MSW
Cancer Resources & Advocacy
7303 23rd Ave. NE
Seattle, WA  98115
206-229-2420
http://ramoslink.info/