Families USA study shows VA drug prices consistently and significantly lower than Part D plans’ pricing
“Families USA analyzed the drug prices that Part D plans charge forthe 20 drugs most frequently
prescribed to seniors. We examinedprices for each of the plans offered by the five largest Part Dinsurers. Combined, these five insurers serve about two-thirds of allPart D beneficiaries (Table 1). Because these companies have, by far,the largest share of the total market for Part D plans, they have thegreatest ability among all the private Part D insurers to secure thebest drug prices. Yet, as our analysis demonstrates, their prices aremuch higher than those obtained by the Department of Veterans Affairs(VA), which negotiates for low drug prices on behalf of America’sveterans.
We found that for all of the top 20 drugs prescribed to seniors, VAprices are substantially lower than the lowest prices charged by thelargest Part D insurers. The median difference was 58 percent. In otherwords, for half of the 20 drugs, the lowest price charged by thelargest Part D insurers is at least 58 percent higher. What’s more,when we examined the full range of Part D plan prices, we discoveredthat the highest plan prices are considerably higher than their lowestprices.
In addition, to assess the effect that meaningful price negotiationwould have on R&D, we analyzed the most recent annual filings tothe Securities and Exchange Commission (SEC) by the seven largestU.S.-based pharmaceutical manufacturers. These filings report eachcompany’s R&D expenditures and profits, as well as what eachcompany spends on marketing, advertising, and administration. We foundthat, on average, these drug companies spent more than twice as much onmarketing, advertising, and administration as they did on R&D.Moreover, most of these drug companies retained profits that werelarger than their R&D expenditures.Key Findings from a FamiliesUSA study:
The lowest Part D plan prices are significantly higher than the prices obtained by the VA.
* For each of the top 20 drugs prescribed to seniors, the lowest price charged by any of the top Part D insurers is higher than the lowest price secured by the VA.
* Among those top 20 drugs, the median difference between the lowest Part D plan price and the lowest VA price is 58 percent.
The price differential between the lowest VA-negotiated price and the lowest price available from a Part D private plan is often substantial. For example:
* For Zocor (20 mg), a lipid-lowering agent, the lowest VA price for a year’s treatment is $127.44, while the lowest Part D plan price is $1,485.96—a difference of $1,358.52, or 1,066 percent.
* For Protonix (40 mg), a gastrointestinal agent, the lowest VA price for a year’s treatment is $214.52, while the lowest Part D plan price is $1,148.40—a difference of $933.88, or 435 percent.
* For Fosamax (70 mg), an osteoporosis treatment, the lowest VA price for a year’s treatment is $250.32, while the lowest Part D plan price is $763.56—a difference of 513.24, or 205 percent.
* For Toprol XL (100 mg), a beta blocker, the lowest VA price for a year’s treatment is $250.06, while the lowest Part D plan price is $395.52—a difference of $145.46 or 58 percent.
* For Celebrex (200 mg), an anti-inflammatory, the lowest VA price for a year’s treatment is $632.09, while the lowest Part D plan price is $946.44—a difference of $314.35, or 50 percent.
The median difference between the highest Part D plan price and the VA price is 101 percent. In other words, for half of the 20 drugs, the highest price charged by a large Part D plan is at least twice as high as the lowest price secured by the VA. Many Medicare beneficiaries are in drug plans in which they pay even higher prices.
Each of the seven largest U.S. publicly traded pharmaceutical companies spent substantially more on marketing, advertising, and administration than it spent on research and development (R&D).
* In 2005, five of the seven companies spent at least twice as much on marketing, advertising, and administration as they did on R&D.
* On average, marketing, advertising, and administration comprised 32.0 percent of company revenues, while R&D represented 13.9 percent of company revenues.
Profits exceeded R&D expenditures for most of the large pharmaceutical companies.
* Five of the seven companies generated more in profits than they spent on R&D in 2005.
* On average, companies reported 17.4 percent of revenue as profits, whereas spending on R&D represented 13.9 percent of company revenues.”