Press Release

PhRMA Statement on AARP Report

PhRMA April 30, 2013

Washington, D.C. (August 25, 2010) — Pharmaceutical Research and Manufacturers of America (PhRMA) Senior Vice President Rick Smith today issued the following statement on AARP’s latest drug pricing report:

“AARP, one of the largest insurance providers in the U.S., released a distorted and misleading report that doesn’t paint an accurate picture of prescription drug spending in the U.S. Unlike what AARP suggests, in recent years drug costs have been growing slowly, not fast. Independent analysts have pointed to a historically low growth rate of drug costs in the U.S. In fact, the growth rate for medicines in 2008 was the slowest since 1961. Here are the facts:

  • The Centers for Medicare and Medicaid Services (CMS) Office of the Actuary (OACT) reports that drug spending grew 3.2 percent between 2007 and 2008, slower than the 4.4 percent growth for health care overall.
  • IMS Health forecasts that market growth will remain at ‘historically low levels’ through 2013, at an average annual rate of 3.5 percent.
  • The Consumer Price Index (CPI) includes a blend of brand medicines and generic drugs that reflects what consumers actually buy. Since 2000, prices for prescription medicines have risen in line with medical inflation. These government CPI data show that drug prices increased by 3.4 percent for the period covered by AARP's most recent report, less than half the growth rate AARP assigns to brand drugs.
  • At the same time AARP reports price increases, CMS projects that average monthly premiums for seniors in Medicare Part D will increase by just $1 between 2010 and 2011, from $29 to $30. CMS also states that ninety-nine percent of beneficiaries will be able to choose a Part D plan in 2011 for the same or lower premium than what they currently pay.
  • According to the 2010 Medicare Trustees report, total costs for the Medicare prescription drug benefit have declined $261 billion, or 41 percent, compared to the initial 10-year cost estimate for 2004 to 2013. The Trustees report attributed the decline, in part, to lower prices on medicines.
  • Significant enhancements are being made to Part D. Perhaps most important, starting in 2011, America’s biopharmaceutical research companies will provide a 50 percent discount on brand-name medicines in the coverage gap to eligible beneficiaries. This will reduce beneficiaries’ out-of-pocket costs.

“AARP’s report is misleading because nearly half of the drugs on its top 25 brand-name drug list were filled as generics in the first part of 2010, but AARP counts these drugs as if they were brand-name drugs. The report calculates costs in this inaccurate way even though it acknowledges that brand-name drugs typically lose about 90 percent of their sales after going generic. The result is an overstatement of consumers’ actual costs for these medicines and there is a tremendous disparity between AARP’s report and the numerous independent analyses showing drug costs growing slowly.

"In the U.S., we have a system that’s been designed to promote both continued medical advances and cost savings. Brand-name biopharmaceutical research companies are a driving force behind medical advances. After a certain time on the market, brand-name medicines are then available as generics.

“While we all recognize that generics play a valuable role in our health care system, innovative medicines offer hope to advance treatment for diseases such as cancer, heart disease and Alzheimer’s. Looking at Alzheimer’s alone, a recent study projects that developing new treatments that would slow the progression of the disease by five years would save Medicare and Medicaid $100 billion per year by 2030. Therefore, it is short-sighted to view medicines only as a cost and not as a critical source of better health outcomes and savings to the health care system.

“Despite their small share of health costs – relative to other health services – medicines are yielding major health advances. For instance, prescription medicines have played a key role in the dramatic declines in death rates resulting from cancer, heart disease and HIV/AIDS in recent years.”

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 $50.3 billion in 2008 in discovering and developing new medicines. Industry-wide research and investment reached a record $65.2 billion in 2008.

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