CommunityPam's House Blend

Drug prices increasing ahead of other inflation


Credit: Jeff Stahler, Cincinnati Post

WASHINGTON – Price increases for popular brand-name prescription drugs rose at twice the general rate of inflation for the year ending June 30, though the gap narrowed a bit, the AARP said Tuesday.

The lobbying group said the average price increase for 193 brand name drugs amounted to 6.1 percent. Meanwhile, the overall inflation rate amounted to 3 percent for the year.

“It’s moving in the right direction. I will say that,” said John Rother, AARP’s director of policy and strategy. “But this is the sixth year in a row of price increases that are at least twice the rate of inflation, so it has a cumulative effect that I think is pretty serious.”

No kidding! My father requires $800 worth of prescription medications per month to live. Fortunately, some of that is covered by insurance, but it still leaves him with a $350 bill per month on his fixed Social Security disability income. So he still drags his painful dead feet (neuropathy is just one of his problems) in to work, five days a week selling cars, and mom still works a full-time job on her feet all day, too. Any dream they ever had of retiring died with my dad’s massive medical bills from nearly dying five years ago.

I suppose they should have worked harder, planned better, and become multimillionaires if they wanted to be able to afford healthcare, huh?

Pharmaceutical companies take issue with the AARP’s comparison of drug prices to overall inflation. They say the more appropriate comparison is to medical inflation as measured by the Consumer Price Index.

The CPI indicates that medical inflation increased at an annual rate of 4.2 percent between July 2004 through June 2005, while drug prices, including generics, went up about 3.4 percent, a spokesman for the pharmaceutical industry said.

“Experts tell us that AARP’s numbers simply do not reflect the true amounts paid by seniors for their medicines,” said Ken Johnson, senior vice president of The Pharmaceutical Research and Manufacturers of America. “Unfortunately, AARP seems more interested in getting headlines than in helping America’s seniors.”

See, dad? You really have no reason to complain. Sure, $800 a month is a lot of money, but if drug prices were as bad as medical inflation, it might be as much as $1,000! Besides, you’ve got President Bush’s Medicare Prescription Drug Plan, which forbids Medicare from bulk negotiating lower prices, and the administration’s refusal to allow cheaper prescription drug imports from Canada, so what’s the problem?

[In 2002] the 10 biggest drug companies maintained nearly the same level of total profits they had in 2001, according to Fortune magazine’s annual analysis of America’s 500 largest companies. As a group, the drug companies had $35.9 billion in profits in 2002, compared with $37.2 billion in 2001, a drop of 3.5 percent. By comparison, all companies in the Fortune 500 suffered a combined loss of 66.3 percent in profits from 2001 to 2002. Stunningly, profits registered by the 10 drug companies were equal to more than half of the $69.6 billion in profits netted by the entire list of Fortune 500 companies – when all losses are subtracted from all gains.

Just as they did in 2000 and 2001, the 10 drug companies in the Fortune 500 topped two key measures of profitability in 2002. Collectively, the pharmaceutical companies in the Fortune 500 reported:

  • A profit of 17 cents for every dollar of revenue, compared with a Fortune 500 median of 3.1 cents per dollar of revenue.
  • A return on assets of 14.1 percent, compared with a Fortune 500 median of 2.3 percent.
  • Along with earning the highest rankings in these two categories, the drug industry ranked second among all business sectors in return on shareholder equity, with a rate more than two-and-a-half times the Fortune 500 median (27.6 percent compared with 10.2 percent).

Well, at least the CEOs of the drug companies can afford their own prescriptions. Thank goodness for that.

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RadicalRuss1

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