Price of Drugs for the Elderly Soars

The AARP put out a remarkably complex research paper that shows, among other things, that the costs that people over 50 paid for commonly used drugs rose 25.6% between 2005 and 2009. The data used in the AARP Public Policy Institute research was based on the retail prices of the 469 most used prescription drugs among people over 50. To make matters worse, the price for the 441 most common drugs for treatment of chronic disease rose 46.7%. The findings beg the question of who is minding the drug price store.

The AARP, the primary lobbying group for older Americans, has a stake in the drug price battle. Its millions of members expect the association to help them live affordable lives. That is part of the reason these people pay dues to the AARP. That does not make the data any less compelling.

Much of the focus on bringing down health care costs has been on doctors, hospitals and affordable insurance. These sectors of the health care business involve hundreds of thousands of transactions a year, because of the large numbers of doctors and hospitals and the complex insurance pricing systems. Drug costs are another matter. It is not terribly hard for the federal government to monitor what consumers pay for several hundred drugs and to ask pharmaceutical companies why those prices have risen so fast. In some cases, the reasons may be adequate. Among the reasons are the prices that companies pay for drug ingredients.

While drug companies may be able to explain why the prices of some of their products have risen, whatever the cause, the increases put a burden on Medicare Part D enrollees. This is the part of the Medicare system that pays for prescription drugs. Upward financial pressure on the program makes the cost of Medicare rise. That makes the already acute costs of Medicare, and who will carry the burden for them, more important. The argument about whether the payments for Medicare should be lowered to take the burden off taxpayers is being debated now. Perhaps some of that debate belongs on whether there are defensible reasons that the prices of so many hundreds of drugs have risen so quickly.

The AARP paper concludes that:

The recently-passed health care reform legislation will gradually phase out the Medicare Part D coverage gap through discounts on brand name, biologic, and generic prescription drugs. However, Part D enrollees will continue to be exposed to the effects of the doughnut hole until the legislation’s provisions are fully implemented in 2020. In addition, the value of closing the doughnut hole, while substantial, could be eroded over the years if escalating drug prices are not addressed.

The source of that erosion is mostly from one place. Somehow, the federal government has to examine the roots of it and close the so-called doughnut hole, or what is required to financially support Medicare will continue to soar.

Douglas A. McIntyre