Killing it Softly

Perhaps the debate over Democratic themes for '06 should end with something like, "At least we can do the job." It's not very inspiring, but when we get headlines like this one, it just might work.

Drug Prices Up Sharply This Year

By MILT FREUDENHEIM
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, which represents older Americans, said prices charged by drug makers for brand-name pharmaceuticals 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 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 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."

Again, the old grey lady sticks the money quote in the middle so I decided to emphasize it. The only response the drug companies had was that their costs only went up 2% this year so the study must be wrong. I'm glad they didn't expect anyone to read what the study was looking at, because that spin doesn't work (and btw. where are all of those wonderful products that their gross profits are paying for... if the justification for high drug prices is the cost of research, then why haven't they discovered a cure for cancer yet?).

Now isn't that interesting though... the drug companies are making 25-30% more with this system. I guess we can't say the new program isn't doing what it was designed to do... and if we can scare the grannies with gays marrying, Mexicans in the Attic (tm), and 9-11 then they won't notice vote in their own self interest. Another snip snip snip to the safety net... I hope there is something left before they get out of office.