Prescription Drug Inflation Increases Will Rapidly Erode the Value of Any Medicare Drug Benefit Plan

Sept. 28, 1999

Prescription Drug Inflation Increases Will Rapidly Erode the Value of Any Medicare Drug Benefit Plan

Congress Must Act to Control Runaway Drug Inflation

WASHINGTON, D.C. — A Public Citizen analysis has found that double-digit increases in prescription drug expenditures projected for the next decade will rapidly erode the value of any Medicare prescription drug plan. Using the benefit plan proposed by President Clinton for illustrative purposes, the analysis shows:

In the absence of cost controls, a senior citizen with average annual prescription drug expenditures will see his or her annual inflation-adjusted pharmaceutical expenditures grow from $942 in 1999 to $2,353 in 2011, a two-and-a-half fold increase.

The projected rate of increase for prescription drug expenditures will far outstrip cost of living adjustments to Social Security, which is the major source of income for the majority of seniors. Between 1998 and 2008, drug expenditures are projected to increase at an average annual rate of 10.3 percent, more than four times the 2.5 percent average annual Social Security increase projected over the same period.

Rising prescription drug expenditures will rapidly erode the value of the annual cap in the Clinton plan. It will have lost one-third of its current value of $2,000 in inflation-adjusted 1999 dollars by 2002, the year the plan kicks in. In 2008, a $5,000 cap will be worth just $2,128 — a loss of nearly three-fifths of its value.

Rising prescription drug expenditures will mean that a senior with average annual drug expenditures will have higher inflation-adjusted out-of-pocket expenditures for drugs after the fourth year of the Clinton plan than in the year before the plan began.

“Unless Congress acts to control runaway prescription drug expenditure inflation, any Medicare prescription drug benefit plan — not just President Clinton’s plan — is likely to cost too much and offer too little in benefits,” said Joan Claybrook, Public Citizen?s president. “Neither the seniors and people with disabilities who rely on Medicare nor the taxpayers whose dollars will support the drug benefit can afford to subsidize drug companies’ escalating prices and profits.”


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