Prescription drug spending in the United States totaled $250 billion in 2009. $78 billion of the total was spent by the federal government, or one of every three dollars. During negotiations over health care reform, drug companies agreed to give a 50% discount on their brand drugs to seniors who go into the Part D donut hole. This change starts in 2011, and there has been a lot of talk that drug companies were raising prices to lessen the effect on their bottom lines – and reduce real savings for seniors.
Back when Democrats were in control of Congress, they commissioned a study of pricing trends for brand and generic drugs, and the report is now in. It turns out that prices did not increase significantly from 2009 to 2010. Instead, they rose steadily each year during the four-year period from 2006 to 2010.
One group of brand drugs saw prices rise on average 6.6 % each year, while another group of drugs rose at an average annual rate of 8.3%. These increases may seem modest, but when you consider the four-year period, price increases totaled between 25% and 32%.
While brand name drug prices increased, generics went down an average of 2.6% each year from 2006 to 2010. When the study looked at brand drugs with generic substitutes, the brand drug prices rose only 2.6% per year. So it would seem that competition from generics forced the brand name drug companies to hold down their prices.
The full report can be found here, and I’ve provided information on some widely used drugs below.
The price for Plavix rose on average 7.1% each year from 2006 to 2010.
2011 price: $190.78
Lipitor rose on average 6.1% each year.
2011 price: $151
Lantus (insulin) rose 13% each year from 2006 to 2009, but then rose only 5.7% from 2009 to 2010.
2011 price: $104.63
Advair hfa, an inhaler, rose on average 8.3 % each year from 2006 to 2010.
2011 price: $221.39
Flomax rose at a rate of 17.6% per year from 2006 to 2010, with a 25% increase from 2009 to 2010.
2011 price: $142
NOTE: With a Part D drug plan, a person’s co-pay for these drugs would likely be $40 to $50 if the drug is a tier 2, or “preferred brand”. This means significant savings for the senior – but Medicare is actually paying for the rest of the cost of the drug.
For the full report, go to http://www.gao.gov/products/GAO-11-306R