Prices of Brand-Name Drugs Continue to Rise Faster Than Inflation
Generic Prices Hold Steady
During the 12 months ending in June 2006, makers of 193 brand-name drugs commonly used by older Americans increased the prices they charge wholesalers and other direct purchasers substantially higher than general inflation over the same period. Brand-name drug manufacturers’ prices went up, on average, by 6.3 percent during that period; inflation was 3.8 percent.
In contrast, makers of 75 generic drugs widely used by older Americans raised their list price a scant 0.4 percent in the 12 months ending June 2006, and no generic manufacturer increased its list price for drugs in the sample during the first six months of 2006.
Assuming that brand-name manufacturers’ price hikes are passed on to consumers and other payers—and there is evidence this is the case—the bite out of the pocketbook could be substantial. Of the 193 drugs in the sample, 187 are used to treat chronic conditions and thus are taken on a regular basis. At the end of June 2006, the average annual increase for one of these drugs was almost $71 ($70.74). This is the highest dollar increase in the average annual cost of therapy since 2000 and a substantial jump over the 2005 increase of $47.43.
The typical older American takes four prescription drugs on a regular basis. Assuming these are all brandname products, the individual’s cost for therapy could have gone up almost $283 over the 12 months ending June 2006.
Over a shorter time period, the story is different however. During the second quarter of 2006, manufacturers’ increases in brand-name drug prices were, on average, lower than inflation; manufacturers’ brand-name drug prices were up 0.5 percent compared to an increase in general inflation of 2.3 percent.
Brand-Name Drugs With Highest IncreasesIn the first six months of 2006, Aventis’s Ambien 5 mg, frequently prescribed as a sleeping aid, had the highest manufacturer’s price increase of any drug in the brand-name sample. It went up 13.3 percent; Ambien 10 mg was up 9.9 percent. The price of two products from Boehringer Ingelheim—Combivent 120-20 mcg/act (used to treat chronic obstructive pulmonary disease) and Atrovent Inhaler 18 mcg/act (used to treat lung disease such as chronic bronchitis)—both increased by 12 percent.
Ambien 10 mg is among the 25 best-selling brandname products in the AARP sample. Its price increase of 9.9 percent during the first six-months of 2006 was the highest among the top drugs, followed by Pfizer’s Lipitor 10 mg and Celebrex 200 mg, 6.5 percent each.
Through its Rx Watchdog project, AARP regularly monitors price changes by manufacturers of brandname and generic drugs and reports its findings to its members and the general public. This AARP Rx Watchdog is based on two reports by the AARP Public Policy Institute, "Trends in Manufacturer Prices of Brand-Name Prescription Drugs Used by Older Americans—Second Quarter 2006 Update" and "Trends in Manufacturer List Prices of Generic Prescription Drugs Used by Older Americans—Second Quarter 2006 Update." Both reports are available on aarp.org/research/PPI.
