If you had any doubts that drug prices have been on the rise, there is now proof: A recent (September 2018 study from AARP, the senior citizen advocacy group, found that in 2017, retail prices for 267 widely used brand-name prescription drugs increased by an average of 8.4% – compared to a general inflation rate of 2.1% over the same period. The report shows that the annual average retail cost of a brand-name prescription drug was nearly $6,800 in 2017. But had pharmaceutical price increases been limited to the country’s general inflation rate between 2006 and 2017, that cost would have been more than $4,600 lower.
Scary Price Hikes
This study was an update of a previous AARP report, "Trends in Retail Prices of Prescription Drugs Widely Used by Older Americans: 2006 to 2015." In 2015, retail prices for a combined set of 768 widely used prescription drugs increased by an average of 6.4%; in contrast, the general inflation rate was 0.1%, according to the report. Over the decade studied, the average annual retail price of a widely used prescription drug more than tripled, rising from $4,202 in 2006 to $12,951 in 2015.
To be clear, those costs are for taking one drug for just one year. That amount equaled almost four-fifths of the average Social Security benefit ($16,101), over 50% of the median income for Medicare beneficiaries ($25,150) and nearly 25% of the median U.S. household income ($55,775) over the same time period.
Many already suspected that prices for existing drugs have been increasing steadily, and this study confirms it. Driven entirely by manufacturer price hikes, it’s a trend that’s expected to continue. In 2006, for example, the average annual percentage price increase was 4.1%; in 2013, it was 12.5%; in 2015, it was 6.4%. The price increases exceeded the corresponding rate of general inflation every year from 2006 through 2015 (the duration of the study). “Our concern with the prices we’re seeing is that the overall trend is really accelerating,” Leigh Purvis, one of the study’s authors and the director of health services research at AARP’s Public Policy Institute, told the Associated Press.
High Costs Affect Everyone
Rising drug prices can be especially problematic for seniors because Medicare plans typically require patients to share more of the costs than employer or other commercial health insurance plans do. That cost sharing could be as much as half the dollar amount of the most expensive drugs, according to Purvis. “This affects everyone,” said Purvis, because even those who don’t use prescription drugs essentially share in the costs through higher insurance premiums and taxes that fund Medicare, the U.S. Department of Veterans Affairs and other health programs.
High drug costs are also a problem for the growing number of people taking multiple drugs, or who need long-term meds for chronic health conditions. According to the U.S. Centers for Disease Control, in 2013–2014 (the most recent data available), 69.6% of adults aged 45–64 and 90.8% of those aged 65 and over took a prescription drug in the past month – up from 54.8% and 73.6%, respectively in 1988–1994. But what's really soared is the numbers taking five or more drugs monthly: 20.2% (vs. 7.4%) of 45- to 64-year-olds, and 42.2% (vs. 13.8%) of the 65-plus crowd. With more adults taking more meds, and drug prices rising, it’s becoming increasingly difficult for many to afford the prescription drugs they need, which can lead to worse health outcomes and higher healthcare costs down the road.
How to Save on Drugs
Despite rising prescription drug costs, there are some things retirees can do to save. A good first step is to ask your doctor if there’s a generic version of the drug you’re taking (and if so, make sure you get the prescription for it). Generic pills often cost about 85% less than their brand-name counterparts, especially if there are several generic versions available. Today, generics drugs account for about 87% of prescriptions filled in the U.S. Although their prices typically decline over time, you can’t count on it, so it’s important to find other ways to save.
Another good option is to shop around for the best price. Even though it seems like your prescription should cost the same no matter which pharmacy you use, that’s not the case. A prescription at one place, for example, might cost $100, while the same prescription at a place across the street could end up costing just $20. Call each pharmacy in your area to ask how much your prescription will cost to fill, based on your health insurance coverage, or try an online price comparison tool, such as GoodRX or RXPriceQuotes.
Mail-order prescription services often offer lower prices, as well. Your insurance provider may have an arrangement with a particular one. The convenience of automatic refills and delivery can be a boon to those who take medication regularly for chronic conditions.
The Bottom Line
AARP’s reports reveal that average annual increases in retail prices for widely used prescription drugs have exceeded the rate of general inflation every year from 2006 to 2017. This is especially hard on seniors because the ever-increasing average annual price tag for medication is cutting deeper and deeper into the average Social Security retirement benefit and the median income for Medicare beneficiaries.
Asking your doctor for generic drugs, shopping around for the best price and signing up for a Medicare Prescription Drug Plan (Part D) are all ways to save on drug costs. Also, keep in mind that a healthy lifestyle may help you save not only on drug costs but your overall healthcare expenses as well.