Increase in Rx costs surpasses inflation rate

Increases in the prices of prescription drugs have far outpaced the rate of general inflation over the years, as increases in the prices of branded and specialty drugs have offset decreases in the prices of generics, according to a new report by AARP’s research arm.


The study, conducted by AARP’s Public Policy Institute, found that the cumulative change in drug prices from 2005 to 2009 was almost double the rate of inflation. As a result, the average annual cost of drug therapy continued to rise.


The study was based on examinations of retail prices for the 514 drugs most used by Medicare beneficiaries. In 2009, while the rate of general inflation was -0.3%, the drugs increased in price by an average of 4.8%. Branded drugs increased in price by 8.3%, while specialty drugs rose by 8.9% and generic drugs decreased by 7.8%.


“For the people who rely on these drugs, such relentless price increases have serious implications,” AARP SVP public strategy Cheryl Matheis said. “Despite price reductions for generics, it’s evident that the considerable increases in brand-name and specialty drug prices are still leaving Americans with overall costs that are growing far faster than the rate of inflation.”


The report found that the “marked” decreases in prices of generic drugs between 2005 and 2007 dropped the rate of increase to slightly below the rate of general inflation for almost six years, but since 2008, continued growth in specialty and branded drugs have “more than offset” the lower costs of generics. The report called the finding striking because generics already had lower prices and represented slightly more than one-fifth of total drug expenditures by Medicare Part D plans in 2006.


For the 469 drugs on the market since the end of 2004, prices increased by 25.6% from 2005 to 2009, while the general inflation rate was 13.3%. Consumers taking drugs to treat chronic diseases found that their average annual cost increased from $2,160 to $3,168.


The report received praise from the country’s largest trade group representing generic drug manufacturers. “The AARP report offers an important reminder of the vital role generic medicines play in reducing costs throughout the healthcare system, while providing patients access to safe, effective and affordable treatment options,” Generic Pharmaceutical Association president and CEO Ralph Neas said. “With evidence of the dramatic savings generic drugs can achieve becoming more prevalent every day, we urge lawmakers to ensure that efforts to reduce spending do not in any way dampen the availability and use of lifesaving and life-enhancing generic medicines. The future of the U.S. healthcare system and the national economy depend on it.”