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PhRMA Statement on AARP Report

Washington,  (April 16, 2009) – Pharmaceutical Research and Manufacturers of America (PhRMA) Senior Vice President Ken Johnson issued the following statement today regarding AARP’s report:

“Not surprisingly, AARP’s one-sided report fails to acknowledge the sharp recent deceleration in prescription drug spending.  IMS Health reports that prescription drug costs in 2008 grew by 1.3 percent, the lowest rate of growth in 47 years. Unfortunately,  AARP distorts the true, overall picture in hopes of dramatizing its report and deflecting attention from the millions of dollars it earns each year from its insurance businesses.

“According to the government’s actuaries, a slowdown in drug growth is largely responsible for the slowdown in overall health care cost growth.  Medicare's Office of the Actuary’s new estimate of health costs over the next decade reduced the prior year’s estimate of health costs overall by 3%, but cut the estimate of drug costs by 14%.  The Congressional Budget Office just reduced its estimate of the cost of the Medicare prescription drug benefit for the fourth consecutive year.

“New research published in Health Affairs by Harvard economist David Cutler and MIT economist Ernst Berndt shows the recent drop in prescription drug growth to be historic.

“While AARP focuses on selected brand medicines, the government’s consumer price index is the best measure of the prices consumers pay for medicines.  It shows that since the beginning of this decade prescription drug prices grew at an average annual rate of 3.6 percent, while prices for medical goods and services grew at a rate of 4.3 percent.  From 2007 to 2008, average prescription drug prices increased 2.5 percent while overall medical prices rose 3.7 percent.

“In our healthcare system, powerful purchasers negotiate prescription medicine prices in a competitive market.  This system is designed both to encourage high use of generic drugs, which according to IMS Health represented 72 percent of all filled prescriptions in 2008, and to promote on-going innovation and development of new treatments.  Brand medicines bear the cost of research and development needed to achieve treatment advances and to prove that a new medicine is safe and effective.  Over time, these innovative medicines transition to cheaper generics, which piggyback on the brand’s research and development.

“As the baby boomers age, America will need more and better drugs to fight the diseases of aging, not only to improve the lives of seniors, but to save money.  Currently, America’s pharmaceutical research and biotechnology companies are working on more than 2,000 medicines to treat the diseases that most frequently strike seniors, including 91 for Alzheimer’s disease, 32 for Parkinson’s and 861 for cancer.

“Now is the time to focus on achieving affordable, quality healthcare coverage for all Americans, rather than reports that distort reality.  We look forward to working with all who share this goal.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading pharmaceutical research and biotechnology companies, which are devoted to inventing medicines that allow patients to live longer, healthier, and more productive lives. PhRMA companies are leading the way in the search for new cures. PhRMA members alone invested an estimated $50.3 billion in 2008 in discovering and developing new medicines. Industry-wide research and investment reached a record $65.2 billion in 2008.

Contact:  Cindy Loose
(202) 835-3460

Posted: April 2009