Spikes in Drug Prices as Patents Expire
Published: 2011-03-28 - Updated: 2011-10-28
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Synopsis: Brand name drug prices continue to increase after the introduction of generic competition. Annual cost of popular drugs that faced generic competition in 2010 increased by an average of $762 from 2005-2009.
Annual cost of popular drugs that faced generic competition in 2010 increased by an average of $762 from 2005-2009.
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As the prices of brand name drugs widely used by people in Medicare soared in 2009, some of the most notable increases took place among drugs nearing the end of their patents, a new AARP Public Policy Institute study on prescription drug prices found.
In an examination of 217 brand name drugs most commonly used by people in Medicare, the AARP Rx Price Watch report revealed prices for drugs facing generic competition in 2010 climbed by an average of 13.7 percent in 2009, compared to 8.3 percent for all drugs studied. The analysis suggests that drug makers are hiking up their prices shortly before they face competition from cheaper generic versions.
The study also found that brand name drug prices continue to increase after the introduction of generic competition, indicating that consumers who continue choose to taking a brand name product are not likely to experience any price relief once a generic is available.
"Skyrocketing prices of prescription drugs have for years been a threat to the very people who rely on those drugs, particularly for those who live on fixed or stagnant incomes," said AARP Executive Vice President John Rother. "The additional price spike for those drugs nearing the end of their patent protections only adds insult to injury and calls into question the commitment of the industry to keeping health care affordable."
AARP is working to reduce the cost of prescription drugs with common sense measures that would allow for the safe and legal importation of prescription drugs from abroad, improve access to less costly generic drugs and allow Medicare to negotiate prescription drug prices directly with drug makers.
Previous AARP drug pricing reports consistently have found that drug prices are escalating considerably faster than the rate of inflation. This report was the first in the series to specifically examine the prices of brand name drugs both before and after patent expiration.
The report examined the trend over five years and found retail prices for 15 brand name drugs that faced generic competition in 2010 rose by 51 percent between 2005 and 2009, which translated into an average increase of $762 for a one-year supply of a drug. The majority of this price increase took place in the last two years before patent expiration. Similar trends were found among brand name drugs that went off patent in 2009.
Drugs that saw drastic increases included Ambien (5 mg), which jumped 28.2 percent in 2006 before facing generic competition the next year. Flomax climbed 24.8 percent in 2009 before losing its patent in 2010. Medco Health Solutions has estimated that other popular drugs including Lipitor and Plavix will begin facing generic competition by next year.
The list of prescription drugs analyzed in the AARP Rx Price Watch report is based on the drug products most widely prescribed to people in Medicare Part D. Price changes are measured using retail prices as reported by the Thomson Reuters MarketScan® Research Databases.
The full AARP Rx Price Watch report is available at www.aarp.org/rxpricewatch.
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