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Drug Prices Rise Twice as Fast As Rate of Inflation

Manufacturers' wholesale prices for 197 brand-name prescription drugs most frequently used by older Americans rose 3.4 percent during the first quarter of 2004, according to a report by AARP.

Astudy released last month by AARP (formerly known as the American Association of Retired Persons) found that manufacturers' wholesale prices for 197 brand-name prescription drugs most frequently used by older Americans rose 3.4 percent during the three-month period ending March 31, compared with a 1.2 percent rate of general inflation for the same period.

The average annual rate of increase rose from 6.9 percent for the 12 months ending December 2003 to 7.2 percent for the 12 months ending March 2004.

The report, "Trends in Manufacturer Prices of Brand-Name Prescription Drugs Used by Older Americans–First Quarter 2004 Update," is the first quarterly update in a study of changes in prices that drug manufacturers charge wholesalers. A baseline study published in May 2004 looked at prices between 2000 and 2003 and found manufacturers' wholesale prices, on average, had steadily increased and for each year exceeded the rate of general inflation. Researchers are focusing on manufacturers' price to whole-salers because it is the most substantial component of a prescription drug's retail price.

The study, published by the AARP Public Policy Institute, found that 29 percent (58) of the drugs studied had increases in the first quarter (December 31, 2003, to March 31) of more than 5 percent, or more than four times the rate of inflation for the same period. First quarter increases of more than 7.5 percent were found in almost 11 percent (21) of the drugs.

Of the 25 brand-name drugs with the greatest sales in 2003, nearly two-thirds (16) had price increases in the first quarter of 2004. Among those top 25, Aricept, an antidementia drug, rose in price by 4.5 percent, and Neurontin, an anticonvulsant, rose in price by 6.4 percent in the first quarter of 2004.

The report also looked at price increases among drugs by therapeutic category. Anticonvulsants rose in price by 5.6 percent, and antipsychotics rose in price by 4.5 percent. Prices for antidepressants, including SSRIs and other antidepressants, did not increase during the first quarter of 2004, according to the report.

The study is posted online at <http://research.aarp.org/health/ib69_drugprices.pdf>.

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