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Drug Price Trends According to AARP

By March 8, 2016Commentary

Drug prices are a problem; we all know that.  While Medicare now includes drug benefits that most beneficiaries enroll in and that cover much of their drug spending, these higher drug prices can still be especially painful for older Americans often living on fixed incomes.  The latest of the periodic AARP studies on drug prices shows that medications frequently used by seniors continue to show sharp increases in cost.   (AARP Study)   AARP constructs a basket of commonly used generic, brand name and specialty medications for the elderly and measures increases in price for the basket as a whole.  In 2013 the basket had a 9.4% higher price than it did in 2012, compared to general inflation growth of 1.5%.  This price increase was the highest for any year in the period 2006 to 2013.  Brand name drugs contributed a 12.9% price rise, while specialty was 10.6%, but generics ameliorated the overall increase by declining 4% in price.  And looking at the average annual cost of a therapy using a drug in the basket; it was $2960 for a brand medication; $283 for a generic one and a whopping $55,384 for specialty drugs in 2013.

Now in fairness it should be noted that the basket is based on retail prices and who knows what prices are actually paid by PBMs and health plans after all the rebating and discounting that goes on.  And to get the true impact of price increases you would need to weight the basket by actual use.  For example, generics are a huge percent of all prescriptions, but even in this category the rate of price decline has slowed in recent years.  But we have plenty of evidence from multiple sources that drug prices continue to grow every year at a much higher rate than general inflation or, more importantly, than personal income and certainly the per capita income of elderly Americans.

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