Prescription Drugs:

Trends in Usual and Customary Prices for Drugs Frequently Used by Medicare and Non-Medicare Health Insurance Enrollees

GAO-07-1201R: Published: Sep 7, 2007. Publicly Released: Oct 9, 2007.

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Prescription drug spending as a share of national health expenditures increased from 8.9 percent in 2000 to 10.1 percent in 2005--among the fastest growing segments of health care expenditures--and prescription drug prices outpaced inflation during the same period. Rising prescription drug prices can affect consumers, employers, and federal and state governments. Federal policymakers are particularly concerned about rising drug prices as the federal government has assumed greater financial responsibility for prescription drug expenditures with the introduction of a prescription drug benefit to Medicare enrollees in January 2006, known as Medicare Part D. Medicare enrollees are also responsible for a share of drug costs under the Medicare Part D program. As an update to our 2005 report, this report responds to the request from Congress for information on trends in retail prices--known as usual and customary prices--for prescription drugs frequently used by Medicare enrollees and non-Medicare health insurance enrollees. This report focuses on (1) usual and customary price trends from January 2004 through January 2007, and (2) usual and customary price trends from January 2000 through January 2007 for the subset of drugs that were included in both our 2005 report and the current report.

GAO found that the average monthly usual and customary prices reported by two state pharmacy assistance programs increased 13.6 percent from January 2004 through January 2007 for a typical 30-day supply of the 122 prescription drugs frequently used by BCBS FEP Medicare or non-Medicare enrollees. This represents a 4.3 percent average annual rate of increase. Prices increased at similar rates for the 96 drugs frequently used by BCBS FEP Medicare enrollees and the 91 drugs frequently used by BCBS FEP non-Medicare enrollees. We also found that the average monthly usual and customary prices decreased for the 57 generic drugs and increased for the 65 brand drugs from January 2004 through January 2007. Specifically, the generic drug prices decreased 12.8 percent, a 4.5 percent average annual rate of decrease, while the brand drug prices increased 21.2 percent, a 6.6 percent average annual rate of increase. During the same period, based on nationwide data from the Bureau of Labor Statistics, prices for all consumer items for all urban consumers--the Consumer Price Index (CPI)--increased 9.3 percent, a 3.0 percent average annual rate of increase. We also found that from January 2000 through January 2007, average monthly usual and customary prices increased at a faster rate for the 44 brand drugs than for the 43 generic drugs. Specifically, prices for the brand drugs increased 48.6 percent, a 5.8 percent average annual rate of increase, while prices for the generic drugs increased 7.1 percent, a 1.0 percent average annual rate of increase. During this same period the CPI increased 19.9 percent, a 2.6 percent average annual rate of increase.

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