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AARP Says Drug Prices Continue to Rise Faster than Inflation

APRIL 10, 2006 -- The cost of brand-name prescription drugs has outpaced the rate of inflation for the sixth year in a row, a new AARP report says.

The report, released Monday, found that the average price drug makers charged wholesalers and other direct purchasers increased 6 percent in 2005. Inflation over the same time period rose 3.4 percent.

Prices rose 40 percent on average over the six-year period, compared with a 17 percent rise in inflation, according to the report.

"Since these price increases charged to wholesalers are generally passed on in the prices consumers ultimately pay, brand-name drugs have become substantially less affordable to consumers at the same time they are becoming ever more essential to good medical care," John Rother, AARP's director of policy and strategy, said in a press release.

AARP says higher drug prices contribute to higher prescription drug plan premiums and higher out-of-pocket costs for consumers.

The Pharmaceutical Research and Manufacturers of America (PhRMA) takes issue with the AARP report. The industry group called AARP's methods "deeply flawed" and its findings incorrect.

PhRMA, however, uses a different measurement than AARP. The industry group prefers to compare prescription drug price increases with overall medical cost inflation, which was 3.8 percent in 2005.

PhRMA says that government data show that retail drug prices increased only 3.9 percent in 2005. The group said AARP based its findings on non-public data and that the group did not include increases in rebates and discounts seniors received through the Medicare drug benefit (PL 108-173).

"Their fuzzy math and overblown rhetoric have worn thin," PhRMA senior vice president of communications Ken Johnson said in a statement. "The U.S. government's publicly available consumer price data clearly show that inflation of prescription drug prices was in line with overall medical care cost inflation for the past several years."

The AARP study used a sample of 193 brand-name drugs the group says are the "most widely used by older Americans." The group produced the report as part of its "Rx Watchdog" project, a campaign that monitors changes in manufacturers' drug prices.

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