The New York Times led its business section today with the headline: “Drug Prices Up Sharply.” The subject of the piece was a study by AARP showing that prices of prescription drugs rose 3.9 percent in the first three months of this year, four times the rate of inflation. Outrageous!
But wait: it isn’t until you read a little closer that you realize that the price increase just refers to brand-name pharmaceutical prices. And what the article never mentions at all is that the AARP released a second study yesterday, showing that generic drug costs in the
United States were unchanged in the first quarter and fell 0.1 percent over the past year. Here is the key paragraph from the AARP report, which—unbelievably—never made it into the Times piece:
"The rate of increase in average annual change in manufacturer’s list price for generic prescription drugs most widely used by older Americans was about one quarter the rate of general inflation for 2005.”
Now why would the Times ignore lower generic drug prices and highlight higher brand name drug prices? I have no idea. But it drives me crazy, because this kind of reporting reinforces the notion (perpetuated, among others, by big Pharma,) that there is some magical distinction between brand name and generic drugs. There isn’t. Drugs are drugs. And these days, in most of the major therapeutic categories, there is a perfectly acceptable and much cheaper generic substitute available. And the real news from yesterday is not bad news, but good news.
Let’s take a few examples. Lipitor, the Times tells us, rose between 4.7 and 6.5 percent in the first quarter. That’s a hefty increase. But let’s put this in perspective. Lipitor is of the “statin” class of cholesterol lowering drugs, and there is a perfectly good generic statin available—Lovastatin—at a fraction of the cost. (On Drugstore. com: 100 tablets of 10mg Lovastatin cost $62; 90 tablets of the 10mg Lipitor cost $220.) Now is Lovastatin the precise equivalent of Lipitor? Not quite. Is it possible for everyone to substitute one for the other? Not quite. But most people on Lipitor could take Lovastatin and never notice the difference. And what’s more the companies making drugs like Lovastatin aren’t raising their prices right now. They are, in response to increased competition, effectively lowering prices.
Here’s a better example. You can spend $434 for 100 tablets of the 10 mg Prozac, or you can get generic Prozac—Fluoxetine, an absolutely identical molecule—for $55 for 100 of the 10 mg tablets. Why do we care how much Prozac costs, or whether it has gone up by five or ten or even fifty percent in the past quarter? No doctor in his right mind should be prescribing it, no insurer ought to be reimbursing for it, and no patient ought to be taking it when the same drug is available for a quarter of the cost.
Now, of course, it isn’t the case that there is a good generic alternative available in every category. If you want a really good asthma drug, you have to pay the going rate from Merck or Genentech. But these are increasingly isolated cases—and will become even more so over the next few years, as an unprecedented number of major brand name drugs come off patent. And there are enough generic alternatives now available that the impact of higher brand name prices—for consumers who make rational drug choices—is much less than it seems. In fact, what percentage of prescriptions filled last year in the United States were generic? 56 percent. In terms of prescriptions filled, four of the top five American pharmaceutical houses are now generic manufacturers. And that industry is doing exactly what Congress intended when the drug patent laws were re-written: competing against each other and holding prices down.
The Times’ lead read: “Prices of the most widely used prescription drugs rose sharply in this year’s first quarter.” Wrong, wrong, wrong. It should have read: “Prices of the most widely used prescription drugs fell last year.”