Americans have a love-hate relationship with pharmaceutical companies. We’re delighted that they’ve done so much to increase the quality and lengths of our lives and that they consistently develop better products. We just wish the prices were a bit lower–perhaps on the order of Pez candy.
Unfortunately some “citizens groups” exploit this ambiguity with self-published “studies” claiming drug companies exist only to gouge us–especially seniors. One such, Families USA, does this every few years and has struck again. But this year’s report was strengthened with the release of another one from the AARP, both timed to undercut the Bush administration’s just-introduced Medicare discount card. Both say increased costs will essentially wipe out the savings.
Importantly, both groups are lobbyists with political agendas. AARP’s at least is transparent, to keep transferring more and more tax funds in the form of benefits from those under 50 to those over 50 (its membership base). Never mind that these are already the wealthiest Americans, AARP would desperately love you to believe they’re all eating cat food.
The FUSA agenda is socialized medicine, in which drugs are “free” because the recipient doesn’t pay for them–taxpayers do. Indeed, the New York Times called the group the “de facto public relations manager of the Clinton Administration’s campaign for comprehensive health care legislation.” To FUSA seniors are merely pawns.
Still, what did the groups say they found? As the summary in a fawning USA Today piece put it, “The Families USA study found the 30 most frequently prescribed name-brand drugs for seniors rose 6.5% in 2003. For 26 of those drugs available in 2001, prices rose 22% over three years.”
Meanwhile, “AARP’s study of 155 name-brand drugs found an average price increase of 27.6% over four years ending in December, compared with a 10.4% inflation [consumer price index] rate. The average annual increase in 2003 for the most widely used drugs was 6.9%, triple the inflation rate of 2.2%.”
But let’s look into the magicians’ hats for some of the tricks the journalists missed because they rarely read past the press releases.
First, note that both studies refer only to “name-brand” drugs. All of the cheaper generics were ignored. Yet generics on average cost less than a third the retail price of brand-name drugs and comprise just over half of all prescriptions. Last year one major organization noted: “For many years, generic drugs have been a key tool for helping consumers, health insurers, and public payers to reduce their prescription drug costs. Their availability is particularly important in view of renewed rapid health care cost increases, a substantial share of which is attributed to prescription drugs.” The organization? AARP. (Some might note that as a percentage of SPENDING, generics don’t count for that much. But this is somewhat tautological in that part of the reason spending on generics is relatively low is because the drugs are so cheap.)
FUSA picked out several “worst offenders” for its press release, including a blood-pressure medicine it said rose at 6.6 times the CPI. Yet the list of generic hypertension drugs is practically endless. About 30 percent to 40 percent of patients with high blood pressure currently take diuretic hypertension drugs and “a month’s worth of [generic] diuretics costs less than a cup of coffee at Starbucks,” according to Dr. Bruce Psaty of the University of Washington’s Cardiovascular Health Research Unit. Second, the studies don’t take into account dose sizes. Thus Pfizer’s Lipitor, the most-prescribed anti-cholesterol drug in the world, “rose 5.5 times inflation” according to the FUSA release. The AARP made a similar squawk.
But they “forgot” to mention Lipitor price increases were only for the tiniest doses, 10 and 20 milligrams. For four years the price of the higher doses, 40 mg and 80 mg, remained the same. Thus for those most in need of the medicine, the price dropped relative to their other expenses. This is especially relevant considering new research showing that the more you lower your “bad” (LDL) cholesterol, the better off you are.
Third, both groups ignore that the top drugs aren’t the same as three or four years ago. Many didn’t exist until recently and are superior to their predecessors. Consider one of the “culprit” drugs, Celebrex, used for pain and inflammation. Is it costlier than older anti-inflammatory pain relievers like aspirin and ibuprofen? Vastly.
So why do people like me take it? Because it was developed to be gentler on our stomachs. Indeed, according to a 1999 New England Journal of Medicine study, the old-line anti-inflammatories cause over 100,000 hospitalizations each year in this country, with over 16,000 deaths from bleeding ulcers.”
The researchers also estimated the cost of those 100,000 hospitalizations at $15,000 to $20,000 apiece. So ultimately, what’s cheaper: The older tablets or “price-gouging” Celebrex?
Some truly miraculous biotech drugs for seniors, such as Amgen’s Enbrel for rheumatoid arthritis and other diseases, cost a fortune. A year’s supply of Enbrel is about $12,000. Yet Enbrel can stop RA in its tracks, while before that all doctors could offer was pain relievers and anti-inflammatories as the disease continued its hideous course.
Finally, there’s issue of the drugs selected. Both groups insist they used proper methodologies to determine which drugs seniors use most often. Fine. There is no drug that is only used by seniors, and not many that seniors would never use. So it’s important to look at overall drug prices, especially if you’re going to accuse the pharmaceutical companies of price-gouging.
Doing so, we find that from January 2000 through March 2004, pharmaceutical prices actually lagged slightly behind the increase in medical services overall–4.2 percent annually versus 4.6 percent. There are bad reasons why health-care costs keep outstripping the CPI (such as the distortions of a third-party payer system) and good reasons (such as Americans having more money to spend on better health because they’re spending less on necessities like food and other items like TVs and computers.) In any event, it’s wrong to make drug companies the whipping boy.
There are lots of good studies on pharmaceutical price increases, but all of are in published peer-reviewed journals. FUSA and AARP just provided political propaganda, as fake as any placebo.
–Michael Fumento is a senior fellow at Hudson Institute and author of BioEvolution: How Biotechnology Is Changing Our World.