PhRMA Statement on AARP March Watchdog Report

Washington, D.C. (March 5, 2008) — Pharmaceutical Research and Manufacturers of America (PhRMA) Senior Vice President Ken Johnson issued the following statement today on new AARP contentions about pharmaceutical inflation:

“AARP’s numbers simply do not reflect the true amounts that seniors pay for their medicines. And they do not reflect the clear downward trend in prescription drug price growth.

“National healthcare projections released by the Centers for Medicare & Medicaid Services (CMS) just last month estimated that growth in prescription drug spending declined 1.8 percentage points in 2007, a deceleration ‘directly related to drug price growth, which is expected to decelerate 2.1 percentage points to 1.4 points.’

“Furthermore, in early January, CMS reported that in 2006, prescription drug spending grew at its second-lowest level in 11 years. That continued a long-term trend of declining growth rates, and came despite millions of seniors and disabled persons first gaining comprehensive prescription drug insurance that year.

“Since 2000, prescription drug prices have increased at a lower rate than overall medical inflation, according to data from the government’s publicly available consumer price index. From2006 to 2007, for instance, overall medical prices increased by 4.4 percent, while prescription medicine prices increased by a modest 1.4 percent. The prescription drugs measure includes a blend of branded medicines and generic drugs that represents the market basket of medicines that consumers actually buy – rather than the few selectively highlighted by AARP – and also reflects how our system works, with its strong incentives for generic use when a brand medicine goes off patent.

“According to CMS national healthcare estimates, spending on prescription medicines accounted for only 10 percent of total national healthcare spending. That’s the same share as in 2005, despite roughly 14 million seniors and disabled people gaining comprehensive prescription drug insurance for the first time in 2006, through Medicare Part D.

“AARP and PhRMA share a common goal: Ensuring that seniors have access to affordable medicines that can help them fight such diseases as cancer, Alzheimer’s and Parkinson’s. We would welcome AARP’s help in providing lawmakers, opinion leaders, and the public with accurate information that helps to ensure that Medicare patients retain access to a broad array of affordable medicines.”

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The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading pharmaceutical research and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. PhRMA companies are leading the way in the search for new cures. PhRMA members alone invested an estimated $43 billion in 2006 in discovering and developing new medicines. Industry-wide research and investment reached a record $55.2 billion in 2006.

PhRMA Internet Address: www.phrma.org

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