Brand-name drug prices far outpacing generics

WASHINGTON, Sep 27, 2005 (UPI via COMTEX) -- A new federal report has found that brand-name drug prices have increased three times as fast as generic-drug prices over the past four years, and healthcare-reform advocates said this information could be used to encourage legislators to insert a pro-generics provision into the new Medicare prescription-drug benefit currently set to begin next January.

The report, from the Government Accountability Office, found the average price for a 30-day supply of 96 drugs frequently used by Medicare and non-Medicare enrollees increased 24.5 percent from January 2000 to December 2004.

Of the 96 drugs, 20 accounted for nearly two-thirds of the increase, and the price increases for 75 prescription drugs frequently used by Medicare beneficiaries closely resembled the increases for 76 drugs needed by non-Medicare consumers.

Pfizer's Lipitor 10 milligram size and Celebrex topped the list of drug price increases, while only one generic -- hydrocodone/acetaminophen -- made the top 20, and more than 50 frequently used brand-name drugs cost three times more than their generic counterparts.

Other drugs with significant price increases included:

-- Bristol-Myers Squibb's Plavix;

-- TAP Pharmaceutical's Prevacid;

-- Pfizer's Lipitor 20 mg;

-- Sanofi-Aventis's Ambien, and

-- Merck's Zocor.

The report surveyed both the usual and customary prices covered by prescription-drug insurance and the prices individuals without insurance would pay at retail pharmacies. GAO researchers also used two state pharmacy-assistance programs used by Medicare and non-Medicare enrollees, average prices paid to manufacturers by wholesalers and the average suggested sticker prices that wholesalers charge pharmacies.

The report did not take into account manufacturer discounts, and as Pfizer spokesman Paul Fitzhenry told the Kansas City Star, "The report focuses on prices paid by consumers without insurance and in doing so excludes manufacturer rebates or discounts."

"Those deficiencies are noted, but at the same time, there is no mention about the Medicare discount cards that were introduced last year," Fitzhenry said. "These cards provide discounts between 30 and 40 percent or even more for uninsured patients."

Gail Shearer, director of health policy analysis at Consumers Union, said the rebates and discounts often are discussed behind closed doors and it is difficult to determine their value.

"High prices and no negotiations, the real tragedy are the people who have to do without the drugs," Shearer told United Press International. "The government should step up to the plate and ensure that we are getting value for our prescription-drug dollar."

As many as 45.8 million Americans currently are without health insurance, while many more have reduced insurance plans.

Shearer said the GAO study illustrates how drug-price increases remain a problem, and the manufacturers are creating it.

"We're at a critical juncture right now," said Shearer, whose organization is pushing for discounts such as those achieved by the Department of Veterans Affairs for its beneficiaries. "High drug prices and high increases of prices have plagued the healthcare system for years. It's critical for Congress to fix-up policies and rein in drug prices."

Shearer said Congress should act, rather than relying on the market to do so, because average annual drug expenditures are increasing faster than inflation and consumers are being bombarded with brand-name drug advertising campaigns and drug companies are "educating" doctors in choosing branded products.

She said the GAO report also demonstrates the potential savings of generic drugs, which also are highlighted in Consumer Union's Best Buy Drugs Report. The CU report surveys generic drugs that are equally effective and safe but are sold at lower prices than their brand-name counterparts.

"The federal government has the Web site (operated by the Centers for Medicaid and Medicare Services) with information on generic drugs, but the question is, is the information getting into the heads of the people who need it?" Shearer asked. "We think it's time there be information to help consumers and doctors about equally effective drugs."

She said higher drugs prices affect the insured because employers tend to shift more cost onto their employees when premiums rise. Likewise, she added, those with Medicare benefits must carefully consider their drug-purchase options when the new benefit plan engages in January.

"It is crucial that people understand that not all high-priced drugs will be covered by all drug plans," Shearer said. "Medicare beneficiaries need to find out which drugs are covered by the plan they are considering and keep in mind that sometimes, equally effective and safe drugs are available at a much lower price."

Consumers Union is not the only organization looking at drugs prices. AARP, the seniors' advocacy group, released a study last month that looked at trends in prices of brand-name and generic drugs used by the elderly.

Among AARP's findings, 110 of 195 brand-name drugs had price increases from Dec. 31, 2004, to March 31, 2005.

"As a result of this and increased prices in recent years, a typical older American (who takes three prescription drugs) is likely to have experienced an increase, on average, in the cost of therapy from the year 2000 through March 31, 2005, of $866.16, if the drugs are brand-name products used to treat chronic conditions, and the full price increases were passed along to the consumer," the AARP study concluded.

AARP researchers found, however, that manufacturer list prices for 75 selected generic drugs rose by 0.7 percent during the year ending March 31, 2005. That slight increase represents a "substantial slowing" compared to dramatic increases in the past, the study said, and only three drugs out of the 75 generics registered a price increase during the first quarter of 2005.

Moreover, the National Association of Chain Drug Stores reported that in 2004 the average price of a generic drug was $28.74, compared to $96.01 for a brand-name drug.

IMS Health, a leading health-research company, expects U.S. generic-drug sales to top $28 billion this year, nearly 65 percent more than previous estimates. The company released its estimate at the Generic Pharmaceutical Association's policy conference this month, as reported by the Newark Star-Ledger.

IMS Health also reported that U.S. sales in 2004 of brand-name drugs totaled $217.4 billion, while generic sales topped only about $18 billion.

For these reasons, generic drugs could occupy a more prominent place in the Medicare prescription-drug benefit plan.

Generic-drug companies continue to run into safety concerns and delayed approvals from the Food and Drug Administration, however, particularly involving biologic cancer drugs. Competition also remains a factor, mostly from brand-name companies producing generics themselves. These branded generics, as they are called, account for a significant portion of increased generics use.

The IMS Health report said "sales of cancer treatment are expected to more than double over the next five years to $55 billion, with cancer drugs replacing cholesterol-reducing medicines as the No. 1 pharmaceutical sector."

The company also said despite generic drugs being filled in half of the nation's 3.6 billion prescriptions, sales growth should slow down this year to 6.7 percent compared to an annual average of 13.5 percent since 2000, the Star-Ledger reported.

Dr. Alan Sager, director of the health program at the Boston University School of Public Health as well as the university's healthcare-reform program, said higher brand-name prices might allow generic manufacturers to raise their own prices, because they tend to price their products in the shadow of brand-name competitors.

"As brand-name-drug makers raise prices, generic-drug makers will find room to boost their prices to compete for market share," Sager told UPI.

He said although generic-drug usage has been increasing steadily as prescription drugs become less affordable every year, he is not surprised about brand-name companies seeking continued profits when their products go off patent.

"Generic drugs are a side show in a circus," Sager said. "They attract a lot of attention, but the main event is the big tent -- the brand-name drug makers."

He said he thinks the answer to increasing drug prices is controlling them and making drugs affordable to everyone, despite claims that lowering drug prices will slow down the innovation process.

"Rising prescription brand-name drugs are raising insurance premiums to unaffordable heights," Sager said. "The existing world of multiple prices and multiple discounts, and great amounts of complexity and paper work, harm ordinary American patients, businesses and taxpayers."

Stokely Baksh is an intern for UPI. E-mail: sciencemail@upi.com

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Copyright 2005 by United Press International