ElderWeb

The Florida Agency for Health Care Administration announced that they have published a new guidebook online, called Understanding Prescription Drug Costs. The guide contains information for everyone who needs prescription drugs - whether or not they have health insurance to cover those costs. The purpose of this brochure is to help consumers know what cost-saving options there are and what questions to ask. They point out that the best sources of information to help save money on prescription drugs are physicians, pharmacists, and the customer service or employee benefits office of your health insurance plan. The brochure is a new addition to the extensive information about drugs available on FloridaHealthStat.com, the official source of consumer healthcare information from Florida government health and human service agencies.

The Health Care Financing Administration (HCFA) has published a directory of programs that provide assistance with drug costs on its Medicare.gov site. The directory allows you to select a state and zip code, as well as manufacturers and diseases and conditions you are especially interested in. It then provides a list of drug assistance programs that fit these criteria, along with contacts and frequently asked questions. The database is still evolving and does not include all programs yet, but the tool provides one way to see if assistance is available for the cost of pharmaceuticals. For other programs and directories, see ElderWeb's Drug Cost page.

FamiliesUSA has issued a report about past and projected future costs to the elderly of prescription medicines. Their study shows that the 65+ population constitutes only 13% of the population, but accounts for 34% of all prescriptions dispensed and 42% of every dollar spent on prescription drugs! Seniors will average $1,205 a year on prescription drugs in 2000, which will comprise about 10% of their average total healthcare expenditures of $12,028. There has been a 116% increase in prescription drug expenditures since 1992, as compared to a 59% increase in total healthcare expenditures during the same time period. These increases are due to changes in both utilization and cost. The average number of prescriptions increased from 19.6 in 1992 to 28.5 in 2000, and the cost per prescription increased from $28.50 in 1992 to $42.30 in 2000. FamiliesUSA had no figures for the percentage of this expenditure which would be born out-of-pocket in 2000, but pointed out that Medicare beneficiaries paid nearly half of their prescription drug costs out-of-pocket in 1996.

Families USA released a report about the rising cost of pharmaceuticals for older people. The report found that in the one year period from 1999-2000:

* Prices for the 50 drugs most frequently used by seniors rose, on average, nearly double the rate of inflation
* Of the 50 drugs, only 12 rose slower than inflation; nine had no price increase.
* Prices for 33 of those drugs rose by at least 1.5 times the rate of inflation.
* Prices for 25 of those drugs rose at least twice the rate of inflation.
* Prices for 15 of those drugs rose at least three times the rate of inflation.
* Prices for 11 of those drugs rose at least four times the rate of inflation.

The cost of one drug, furosemide (a diuretic manufactured by Watson and used to treat conditions such as hypertension and congestive heart failure), rose by 50%, about 23 times the rate of inflation. Another drug, Klor-Con 10 (manufactured by Upsher-Smith and used as a potassium replacement), rose 44%, or about 20 times the inflation rate.

The Department of Health and Human Services (HHS) released a report about cost and access to drugs for Medicare beneficiaries. The report found, among other things, that seniors who do not have insurance for drug costs not only must pay for those costs out of pocket, but also pay higher prices than those in health plans. In 1999, excluding the effect of rebates, the typical cash customer paid nearly 15% more than the customer with third party coverage. For a quarter of the most common drugs, the price difference between cash and third parties was even higher, over 20%. For the most commonly prescribed drugs, the price difference between cash customers and those with third party coverage grew substantially larger between 1996 and 1999.

The report also found that drug benefits, where available, are becoming less generous. Cost sharing for prescription drugs is increasing and that caps on coverage are becoming more common and are being set at lower levels. 86% of plans have annual dollar limits on drugs, including 70% of plans with annual caps of $1,000 or less, and 32% with caps of $500 or less per enrollee - up from 35% and 19% in 1998. Of those employers that still offer medical coverage, the survey found that 40% are requiring Medicare-eligible retirees to pay the full cost of their benefits, compared to 28% in 1995.

Congress Watch has issued a new report, "The Truth Behind the Drug Industry?s Deception of America?s Seniors." This report says that the Pharmaceutical Research and Manufacturers of America (PhRMA) created the innocuous-sounding Citizens for Better Medicare (CBM) to serve as its front group. Through CBM, they have budgeted at least $65 million for television advertising since July 1999, and supplemented that with radio, print and Internet ads, along with direct mail appeals from CBM and its member groups. Congress Watch reports that the drug industry has focused the bulk of its attention on trying to prevent the government from adding drug coverage to the Medicare program, for fear that would constrain drug prices. They also mention that the industry is hardly ailing. Fortune magazine has rated pharmaceuticals as the most profitable industry in the country for most of the last three decades. In 1999, pharmaceuticals posted an 18.6 percent return on revenue, more than three times the Fortune 500 median of 5.0 percent.

Congress Watch has created a comprehensive Web site devoted to the issue of prescription drug costs. Congress Watch is a division of Public Citizen, a 150,000 member national non-profit, non-partisan, member-supported public interest group founded by Ralph Nader in 1971.

Health Affairs, a leading journal of health policy, devoted a recent issue entirely to the subject of prescription drug prices and proposed plans to expand Medicare coverage to include them. They discuss drug costs, drug industry advertising, proposed legislative efforts to broaden Medicare coverage, and a host of other related issues.

The government is investigating changing the way they price drugs under the Medicare and Medicaid programs. The primary basis for program pricing currently is the Average Wholesale Price (AWP) of each medication, a calculation provided by drug manufacturers, rather than by any independent third party source. The Wall Street Journal and Reuters report that recent government studies show that these prices have been artificially inflated, resulting in possible overpayments by Medicare and Medicaid of $1 billion a year. The reports show that actual selling prices for many drugs are far less than the AWP, allowing pharmacies and other providers to make a significant profit on pharmaceuticals billed to Medicare or Medicaid.

The Commerce Committee is investigating this issue. The committee chairman, Tom Bliley, wrote in a letter to Donna E. Shalala, Secretary of the Health Care Financing Administration (HCFA), "In its December 1997 report, the Office of Inspector General (OIG) estimated that, in 1996 alone, Medicare could have saved $447 million by reducing the Medicare-allowed price for just 22 drugs to the actual prices available in the private wholesale sector. The OIG also found that Medicare could have saved at least 40 percent of the current allowance for almost half of the 22 drugs, and 93 percent for one particular drug, by limiting reimbursement to the available private sector prices for those drugs. As you know, Medicare is supposed to pay only 95 percent of the Average Wholesale Price (AWP) of these drugs under Federal law."

"These findings are supported by additional investigative work that the Committee on Commerce has conducted. The Committee has written to several drug manufacturers, inquiring about the prices they charge to wholesale purchasers. The responses the Committee received confirmed that Medicare does in fact pay considerably more for certain drugs than the actual average price paid by such wholesalers. In addition, the Committee is continuing to investigate the practices of certain drug manufacturers relating to allegations that they manipulated the AWP of particular drugs in order to increase the sales of these drugs."

In a letter to Charles Rice, CEO of Dey Laboratories, Biley wrote, "When queried by the Committee about the setting of AWPs, the trade association representing the drug manufacturing industry, the Pharmaceutical Research and Manufacturers of America (PhRMA), essentially admitted that AWP is not what it claims to be on its face -- the average price charged to wholesalers -- but is rather just a publicly available benchmark set by manufacturers in their discretion, and upon which insurers base their reimbursements. Indeed, for certain Medicare-covered drugs, it appears that very few, if any, purchasers actually pay the AWP or any price close to it ? except, of course, the Federal government."

Merck-Medco's Drug Trend 2000 Report, entitled "Managing Pharmacy Benefit Costs -- New Insights for a New Century," says that pharmacy benefit costs are rising largely because of higher utilization, with more people taking prescription medicines and patients taking medicines for a longer period of time. Another factor in cost increases is that newer, costlier drugs are replacing older therapies. Their report found that price inflation has had a relatively minor effect on overall drug costs.

Drug costs on a per-member basis have more than doubled in the period from 1995 to 1999, the report notes. Of that increase:

- 30% of the growth was due to new users -- people not previously using prescription drugs who began treatment with a new drug therapy. - 34% was due to more days of therapy per user -- people using drugs did so for a greater number of days per year. - 36% was due to an increase in drug costs per day of therapy -- new drugs, on average, were more expensive than the drugs they replaced.

The report suggested that increased use of generic drugs and mail-service pharmacies can significantly control costs while improving the quality of prescription drug care.

The Health Insurance Association of America announced that spending for prescription drugs is likely to continue to rise at double-digit rates over the next five years, and 40 cents of each new dollar spent on drugs will go for "pipeline drugs" drugs that currently are in development. Total prescription drug expenditures are estimated to double between 1999 and 2004 from $105 billion to $212 billion. They also report that 70% of the most commonly used drugs and 37% of the most frequently prescribed drugs have increased in price.

This research was sponsored by Blue Cross and Blue Shield Association (BCBSA) and the Health Insurance Association of America (HIAA).

The current edition of the AARP Bulletin includes a feature article called "What's behind high drugs prices in the U.S.?" In this article they discuss the disparity between drug prices in the U.S. and the far lower prices charged in other countries by talking to a variety of pharmaceutical manufactures and others who are knowledgeable about the industry. It's an interesting and eye-opening overview of the factors that are driving price increases.

The White House has released a report on the cost and availability of prescription drug coverage in the United States. The report examines each state to identify the current and projected beneficiaries, the number of companies that provide retiree health benefits, the average cost of Medigap plans which include prescription drug coverage, and the percent of Medicare HMOs which include prescription drug coverage in the basic benefit. The report concludes that prescription drug coverage is either unavailable or unaffordable for a large number of middle income Americans.