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Drug Price Increases in 2003 Nearly Triple the Rate of Inflation According to New AARP Study

Organization introduces two new tools to understand drug pricing

A new study released today by AARP finds prices for those brand-name prescription drugs most frequently used by older Americans and available in January 2000 increased, on average, a cumulative 27.6 percent over the four year period 2000 to 2003 as compared to a general inflation rate of 10.4 percent.

This extensive retrospective study of prescription drug pricing by the pharmaceutical manufacturers—price increases that ultimately tend to be passed on to drug purchasers—is the latest action in AARP's campaign for affordable drugs. The study is one of two new activities the Association unveiled today that will closely monitor the pricing actions of the industry. The other is the "Rx Watchdog Report," a consumer friendly newsletter that will inform members and others about pricing issues as well as legislative and legal actions focused on making drugs more affordable.

The study, published by the AARP Public Policy Institute (PPI), tracks the prices of 197 of the most widely used brand-name drugs in each year from 2000 to 2003. The study, "Trends in Manufacturer Prices of Brand Name Prescription Drugs Used by Older Americans, 2000-2003," found the gap widening between the average manufacturers' price increase for brand name drugs and the rate of general inflation. In 2003, the average annual manufacturer price increase for the most widely used drugs was 6.9 percent; triple the rate of general inflation of 2.2 percent.

Earlier this year, AARP asked the pharmaceutical industry to hold its price increases to the rate of general inflation. "Our request was appropriate given the price increases over the last three years. Pricing clearly outstripped inflation. Because of these findings, we will now issue quarterly reports on the drug pricing to monitor the industry's performance," said AARP CEO Bill Novelli.

AARP's top priority this year is lowering prescription drug costs, and the organization is engaged in a campaign for affordable drugs that includes support of the legalization of drug importation from Canada, where many brand name drugs are substantially less expensive than in the United States.

"The new prescription benefit in Medicare was an important step, but our members have made it clear that they want AARP to continue to push for affordable drugs," said Novelli. "AARP's periodic pricing studies will keep track of what the drug industry is doing to keep drugs affordable while our newsletter will help consumers better understand drug industry pricing and how to use medications more wisely to save money and improve their health."

AARP's David Gross and Susan Raetzman, who coauthored the PPI study with Professor Stephen Schondelmeyer of the University of Minnesota, said the study found an upward trend in price increases for brand name prescription drugs. In 2000, 23 percent of the most-used brand name prescription drugs increased in price by more than double the general inflation rate while in 2003, 87 percent of those drugs saw price increases that were double the rate of general inflation. "If the price of drugs keeps going up faster than inflation, it will become more and more difficult for consumers, especially older consumers, to be able to afford them," said John Rother, Director of AARP's Office of Policy and Strategy.

AARP's other vehicle to monitor and report on drug cost is "AARP Rx Watchdog Report" a periodic newsletter that will monitor the activities of pharmaceutical manufacturers and will provide information from experts on the comparative effectiveness of certain drugs, legal developments and the beneficiary experiences with the Medicare drug discount card.

AARP is a nonprofit, nonpartisan membership organization dedicated to making life better for people 50 and over. We provide information and resources; engage in legislative, regulatory and legal advocacy; assist members in serving their communities; and offer a wide range of unique benefits, special products, and services for our members. These include AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARP Segunda Juventud, our quarterly publication for Hispanic members; NRTA Live and Learn for National Retired Teachers Association members; and our Web site, www.aarp.org. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

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