The AARP is continuing to mislead seniors with another in its series of distorted studies. In the latest example, the seniors’ lobby examined a select group of popular pharmaceuticals and found that prices increased much faster than general inflation last year, rising 8.3 percent. AARP officials were quick to use the results to denounce the drug industry. But the study doesn’t tell the whole story. AARP’s researchers examined only a select group of 217 brand-name pharmaceuticals and didn’t look at the whole picture of drug spending – or health spending overall.
According to the Consumer Price Index — the government’s official inflation numbers – drug prices increased by 3.4 percent overall last year. Between 2005 and 2009, drug prices increased an average of 3 percent per year. During the same period, general inflation averaged just slightly less at 2.6 percent annually.
Meanwhile, the AARP study ignored other parts of the health sector that also significantly outpaced inflation and which consume a much greater share of the health care dollar. Hospital services, for example, take the biggest share of health spending, and those prices have increased by an average of 6.6 percent annually since 2005. We’re waiting for that AARP study.
And it ignored the capacity of seniors to seek better value in their drug spending. Many opt for generic versions of the brand-name drugs listed in the study. The AARP says that 70 of the 217 drugs in its survey are available as generics – drugs which are chemically equivalent to their brand-name counterparts
Once they arrive on pharmacy shelves, low-cost generics clobber their competition. The sales for an average brand-name drug drop 90 percent once its generic equivalent comes out. A study on prescription-drug prices that fails to consider seniors’ actual spending on generics is not telling the full story.
Consider also the Medicare prescription drug benefit, which began in 2006. The program empowers seniors to shop for the best, most cost-effective drug benefits from plans that are competing for their enrollment. Largely as a result of these competitive pressures, the program has generated huge savings for seniors and for taxpayers. Seniors have a choice of brand-name drugs and generics with prices negotiated by the drug plans to generate discounts through volume purchasing.
According to a recent Medicare Trustees report, the cost of the program is about 40 percent lower than originally estimated. It is also saving seniors money. This year, the average monthly drug premium is about $30. That’s an increase of just one dollar over last year’s figure. CMS also projects that 99 percent of seniors participating in the program will be able to choose a plan next year that has the same or lower premiums as their current plan.
AARP’s study doesn’t present an accurate picture of the American drug market. Some brand-name drugs are increasing in price. Others aren’t. And three of every four drugs dispensed is a generic, but the study ignored them.
AARP also doesn’t offer solutions to help lower drug prices. It might start by recommending reform of the expensive, cumbersome, and antiquated system of drug approval that costs more than $1 billion to bring a single new drug to market. And reform of the drug approval process could keep the pipeline of innovative medicines open to speed more life-saving and life-enhancing drugs to seniors.
AARP does its members a disservice with this selective and biased study. Our nation’s seniors deserve the highest quality of care – and a better quality of information from the AARP.
Published in The Hill’s Congress Blog, October 12, 2010.