[Ip-health] NYT: Drug Prices Up Sharply This Year

[Amy Nunn]

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Drug Prices Up Sharply This Year


By MILT FREUDENHEIM
<http://topics.nytimes.com/top/reference/timestopics/people/f/milt_freudenhe
im/index.html?inline=nyt-per>

Published: June 21, 2006

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
<http://topics.nytimes.com/top/reference/timestopics/organizations/a/aarp/in
dex.html?inline=nyt-org> , which represents older Americans, said prices
charged by drug makers for brand-name pharmaceuticals
<http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics
/drugspharmaceuticals/index.html?inline=nyt-classifier>  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
<http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics
/cholesterol/index.html?inline=nyt-classifier>  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
<http://topics.nytimes.com/top/reference/timestopics/organizations/u/univers
ity_of_minnesota/index.html?inline=nyt-org>  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
<http://topics.nytimes.com/top/reference/timestopics/organizations/v/veteran
s_affairs_department/index.html?inline=nyt-org>  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
<http://topics.nytimes.com/top/reference/timestopics/organizations/b/bureau_
of_labor_statistics/index.html?inline=nyt-org>  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
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.m
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=PFE> , 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
<http://topics.nytimes.com/top/reference/timestopics/people/g/mark_green/ind
ex.html?inline=nyt-per> , a spokesman for Sanofi-Aventis
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.m
arketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=SNY> , 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."



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