NEW YORK (TheStreet) -- Americans pay higher prices for prescription drugs than the citizens of any other developed country on the planet. And the costs keep increasing.
In a recent report issued by the AARP Public Policy Institute, the retail prices of name brand prescription drugs often used by older Americans were found to have risen more than eight times faster than the general rate of inflation in 2013. That’s the highest average annual price increase since the organization began tracking drug prices in 2004.
“Higher brand-name drug prices can increase health care premiums, deductibles and other cost-sharing for everyone with health coverage, even for those who don’t take medications,” said AARP executive vice president for Policy, Strategy and International Affairs Debra Whitman, in a statement issued with the report. “If these price increases continue, we’ll likely see more people -- particularly older people, who are often on fixed incomes -- stop taking life-saving medications because they simply can’t afford them, leading to higher health-care costs down the road.”
And the rising costs of meds is now impacting the last line of defense for drug affordability -- generics. While prices on generic drugs have fallen in recent years, including a 4% average drop in 2013, it seems that trend may be ending. The report reveals that a number of popular generic drugs have seen “substantial price increases” -- some by as much as 1,000%.
“Declining generic drug prices have helped many Americans’ pocketbooks, particularly older adults on fixed incomes,” Whitman said. “Unfortunately, recent trends indicate that we may not be able to rely on these savings forever.”
Last week, U.S. Sen. Bernie Sanders (I-VT) and Rep. Elijah E. Cummings (D-MD) introduced legislation that would expand Medicaid rebates to generic drugs.
As current laws stand, brand-name pharma manufacturers must pay a rebate to Medicaid when prices increase at a rate greater than inflation. The Medicaid Generic Drug Price Fairness Act, as proposed, would apply the same standard to generic drugs. The non-partisan Congressional Budget Office estimated such a policy change could save taxpayers nearly $1 billion over 10 years.
“It is unacceptable that Americans pay, by far, the highest prices in the world for prescription drugs. For years, generic drugs have made it possible for people to buy the medicine they need at lower prices. We need to make certain that generics remain affordable,” Sanders said in a statement announcing the proposed legislation.
A study issued this month by the Kaiser Permanente Institute for Health Policy in Oakland says U.S. policymakers must also consider implementing price regulations.
“Pharmaceutical prices in the United States are extraordinarily high and have contributed to an unsustainable level of spending on drugs,” the report says. Noting U.S. consumers spend an average of $1,010 annually on prescription drugs, more than “any other developed nation in the world,” the organization says it may be time to consider federal pricing policies.
“Unlike many countries, the United States does not have broad policies or regulations to negotiate or control pharmaceutical prices, which many believe has led to skyrocketing prices,” the report continued. “If the U.S. adopted policies similar to those abroad, pharmaceutical spending would likely go down.”
However, the brief also acknowledges that critics believe such pricing regulations might also stifle innovation:
“Research shows that pricing policies can have an impact on research and development spending,” the report admitted. “Pharmaceutical companies tend to invest in drugs that are profitable, but what is profitable is not always the most beneficial to society. Policymakers must ensure companies have incentives to manufacture drugs that have an overall value that is clearly correlated to the price of the drug.”