AARP study finds sharp rise in price of brand name prescription drugs

November 21, 2014

Retail prices for brand name prescription drugs widely used by older Americans shot up by an average of nearly 13% in 2013, more than eight times faster than the 1.5% general inflation rate, according to a new AARP Public Policy Institute report.

Retail prices for brand name prescription drugs widely used by older Americans shot up by an average of nearly 13% in 2013, more than eight times faster than the 1.5% general inflation rate, according to a new AARP Public Policy Institute report.

The report reveals the highest average annual price increase since AARP began tracking prescription drug prices in 2004.

AARP’s Public Policy Institute, in collaboration with the PRIME Institute at the University of Minnesota, developed a market basket of 227 brand name prescription drug products widely used by older Americans. Using data from the Truven Health MarketScan Research Databases, the report analyzed retail price changes between 2006 and 2013 for the drug products in the market basket.

Brand name drug prices have routinely increased much faster than general inflation over the past 10 years, and the difference between the rate of brand name drug price increases and the rate of general inflation has been widening. In 2013, retail prices for 227 widely used brand name prescription drugs increased by 12.9%. In contrast, the general inflation rate was 1.5% over the same period, according to the report.

“Brand name drug price increases have a corresponding impact on the cost of therapy,” said Leigh Purvis, Director of Health Services Research in AARP’s Public Policy Institute.

The report also found that the average annual cost for one brand name medication used on a chronic basis in 2013 (nearly $3,000) was more than double the average annual cost for a brand name drug in 2006, the year Medicare implemented Part D.

“Spending increases driven by high and growing drug prices will eventually affect all Americans in some way,” Purvis says. “Those with private health insurance will pay higher premiums and cost sharing for their healthcare coverage. Over time, it could also lead to higher taxes and/or cuts to public programs to accommodate increased government spending.

"Continued increases in the cost of drugs will also prompt increasing numbers of Americans to stop taking necessary medications,” Purvis continues. “This will lead to poorer health outcomes and higher healthcare costs in the future.”

More specifically, according to the report, brand name drug price increases could eventually increase hospitals’ costs through a combination of higher costs of providing care, lower reimbursement rates from public programs, increased uncompensated care due to consumers being unable to afford health care coverage, and more patients in poor health due to cost-related non-adherence.

“Managed care organizations will also be affected, as high and growing prescription drug prices and spending increases related to cost-related non-adherence will make it considerably more difficult for them to offer affordable coverage options,” Purvis says.

The report is part of the AARP Public Policy Institute’s ongoing Rx Price Watch report series. AARP’s Public Policy Institute has been publishing reports that track price changes for the prescription drug products most widely used by older Americans since 2004, with annual and quarterly results reaching as far back as 2000.

“The brand name prescription drug price trends that we are seeing are unsustainable, particularly in combination with ever-increasing launch prices,” Purvis says. “Policy makers interested in reducing the impact of brand name prescription drug prices should focus on options that balance the need for pharmaceutical innovation with the need for improved health and the financial security of consumers and taxpayer-funded programs like Medicare and Medicaid.”