New Report Shows Medicare Drug Plan Prices Are 58 Percent Higher than VA Prices

from Families USA

Report Issued as House of Representatives Is Scheduled to Vote Soon to End Prohibition Preventing Medicare from Bargaining for Lower Drug Prices

Washington, D.C. – Medicare drug plan prices for the top drugs prescribed to seniors are 58 percent higher than the same drugs provided to veterans by the Department of Veterans Affairs (VA), according to a report released today.

The new report, issued by the consumer health organization Families USA, was released shortly before the House of Representatives was scheduled to vote on a bill to end the current prohibition preventing Medicare from bargaining for cheaper drug prices. The bill is a top priority for House Speaker Nancy Pelosi and her new Democratic majority.

Here's a link to the full report

For the top 20 drugs prescribed to seniors, the report examined prices charged by the VA compared to the prices charged by the five companies with the largest enrollment in the Medicare (Part D) drug program. Those companies, UnitedHealthcare/PacifiCare, Humana, Wellpoint, Member Health, and WellCare, enrolled almost two-thirds (65 percent) of the Medicare beneficiaries participating in Part D during 2006.

According to the report, the prices charged by plans sponsored by the five companies are 50-75 percent higher than the VA price for Celebrex; 51-82 percent higher for Lipitor (10 mg); 69-95 percent higher for Nexium; 205-261 percent higher for Fosamax; 435-522 percent higher for Protonix; and 1,066-1,229 percent higher for Zocor (20 mg).

“These high prices devastate seniors who need to take multiple medicines, especially when they reach the coverage gap known as the ‘doughnut hole,’” said Ron Pollack, Executive Director of Families USA. “They are also a rip-off of American taxpayers, who pay for three-quarters of the costs of Medicare Part D.”

For all of the top 20 drugs prescribed to seniors, VA prices were substantially lower than the lowest prices charged by the Part D insurers, according to the report. The median price difference was 58 percent. In other words, for half of the 20 drugs, the lowest price charged by the Part D insurers was at least 58 percent higher.

According to the report, the difference between the lowest VA price and lowest price of any of the Part D plans offered by the five largest companies is enormous, including:

* For Protonix, a gastrointestinal agent, the VA price was $214.52, and the lowest Part D plan price was $1,148.40—a $933.88 difference, or 435 percent.
* For Fosamax, an osteoporosis treatment, the VA price was $250.32, and the lowest Part D plan price was $763.56—a difference of $513.24, or 205 percent.
* For Toprol XL (100 mg), a beta blocker, the VA price was $250.06, and the lowest Part D plan price was $395.52—a difference of $145.46, or 58 percent.
* For Celebrex, an anti-inflammatory drug, the VA price was $632.09, and the lowest Part D plan price was $946.44—a difference of $314.35, or 50 percent.
* For Zocor (20 mg), a lipid-lowering agent, the VA price for a year’s treatment was $127.44, while the lowest Part D plan price was $1,485.96—a difference of $1,358.52, or 1,066 percent.

Although a generic version of Zocor (simvastatin) became available in June 2006, the lowest price offered by the top Part D insurers for Zocor's generic equivalent is still 706 percent higher than the lowest VA price for brand-name Zocor.

“Opponents of Medicare bargaining make two contradictory claims. First, they claim that private market competition under Part D is more effective in reducing prices than Medicare bargaining; and second, they claim that Medicare bargaining would reduce prices so significantly it would harm research and development,” said Pollack. “These arguments cannot both be true—and, indeed, neither is true.”

Using numbers the major drug companies have publicly submitted to the Securities and Exchange Commission (SEC), the Families USA report rebuts the assertion that Medicare bargaining would harm research and development (R&D). According to the report, the largest U.S.-based drug companies spent more than twice as much on marketing, advertising, and administration as they spent on R&D (13.9 percent versus 32.0 percent of revenues), and they retained more in profits than they spent on R&D (17.4 percent versus 13.9 percent).

* In 2005, for example, Pfizer spent 2.3 times as much on marketing, advertising, and administration as on R&D (33.1 percent versus 14.5 percent of revenues).
* Merck spent 1.9 times as much on marketing, advertising, and administration as on R&D (32.5 percent versus 17.5 percent of revenues).
* Abbott Laboratories spent 3.0 times as much on marketing, advertising, and administration as on R&D (24.6 versus 8.2 percent of revenues).

The Families USA report’s pricing data were for November 2006 as reported by Part D plans to the Centers for Medicare and Medicaid Services (CMS), as listed on the CMS Web site (www.medicare.gov). VA pricing information was obtained from the VA’s price schedules.

Full Report