Firms extol the savings in Medicare drug cards

Sun Reporter

Drug manufacturers fired back yesterday at consumer advocateswho claim that inflated pharmaceutical prices have eroded savings for Medicarebeneficiaries under a new government-sponsored discount prescription program.

The Pharmaceutical Research and Manufacturers of America, aWashington-based trade group, said seniors using a Medicare discount drug cardwould save 21 percent at retail pharmacies and 26 percent on mail-order pricesfor the 30 top-selling brand-name drugs studied by the health-care advocacygroup Families USA.

Rick Smith, the drug association's senior vice president for policy, toldreporters that Families USA was discouraging needy seniors from enrolling inthe discount card program, which starts Tuesday. The Bush administration ishoping to enroll at least 7.4 million seniors for discount cards. "It saddensme if people don't enroll ... because they're getting bad information thatthese programs are not worthwhile," Smith said.

But Ron Pollack, executive director of Families USA, said his group's studylooked at price inflation for the past three years, during which drug pricesrose nearly 22 percent, on average.

"Drug price increases since Bush took office have risen beyond discountsthat the administration said were possible with the cards," Pollack said in aninterview.

The Bush administration's Medicare drug benefit figures to be a keydomestic issue in the November election. Drug pricing will also be the focusof debate on Capitol Hill in coming days when the Senate is expected toconsider bipartisan legislation that would legalize the importation oflower-price drugs from Canada and other industrialized nations.

Because of price controls, prescription medicine can be purchased for halfas much in Canada as in the United States.

Families USA and AARP, the nonpartisan group that represents seniors andalso released a study this week targeting drug-price inflation, are backinglegalized importation of lower-price drugs as a means of restraining domesticdrug spending.

The AARP study showed the manufacturers' prices for 197 medications mostcommonly prescribed for seniors rose 27.6 percent the past four years, almosttriple the rate of inflation for other manufactured goods. The Families USAstudy showed prices for 30 top-selling drugs rising more than four times theinflation rate last year and 21.6 percent since January 2001.

Drug makers and the Bush administration maintain that importing drugs wouldhave a minimal impact on domestic pharmaceutical prices while opening theborders to potentially dangerous counterfeit drugs. Moreover, they argue,importing drugs from countries that control prices would undermine thefree-market American economy that encourages pharmaceutical research anddevelopment.

"Canada has a price-control system; it's that simple," Smith said. TheUnited States has "market-based pricing that rewards innovation." Overall,Smith said, studies critical of pharmaceutical pricing are off track becausethey compare drug prices with those for consumer goods instead of with overallhealth-care costs. Drug price increases are in line with those for medicalservices.

But AARP analysts said comparing drug price increases with those of othermanufactured goods is fair because pharmaceuticals are manufactured products.The primary driver of health-care price increases is the labor cost, theysaid.

Pharmaceutical spending represents about 10 cents of every health-caredollar.

Smith argued that critics who single out the acceleration of drug prices inrecent years are ignoring that medications can reduce spending onhospitalizations and visits to physicians. Thus, he said, drug pricing getssingled out for rising while other spending declines.

Rising even faster than drug prices are copayments that insurers and healthplans charge beneficiaries for medicine, Smith said.

A PhRMA study released this week showed that insurance co-payments forprescription medicines were increasing at 1.6 to 4.7 times the rate of retaildrug price increases.

The lower rate of co-payment increase was for people buying generic drugs, the higher for those who buy brand names. Co-payments that had long lingered at $10 or less have soared in recent years to $75 or more for the most popular medications.

"It's time," Smith said, "for a broader discussion of health-care issues."

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