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Study Shows Pharmaceutical Companies Are Price-Gouging Pennsylvania Consumers

April 18, 2000

Study Shows Pharmaceutical Companies Are Price-Gouging Pennsylvania Consumers

HARRISBURG, PA — National consumer group Public Citizen and Citizens for Consumer Justice (CCJ) released a prescription drug study today at the AFSCME Conference Center that revealed that senior citizens and people with disabilities without prescription drug coverage are being price-gouged when they purchase prescription drugs.

The study surveyed 98 pharmacies around the state and compared the prices of the 10 most commonly prescribed drugs used by senior citizens and one medication used by people with disabilities. The survey showed that Pennsylvania seniors without prescription drug coverage are being charged retail prices that are more than double — 113 percent higher on average — the prices that prescription drug makers charge their most favored customers, such as HMOs, large insurers and federal agencies.

For the top 10 drugs used by seniors to treat a variety of illnesses, and one medication used by people with disabilities, those in Pennsylvania paid between 48 percent and 231 percent more than drug companies’ most favored customers. Overall, the average retail price for each of the 11 drugs used by seniors and people with disabilities was $173 versus $81 for the most favored customer. Overcharges ranged from 48 percent for the ulcer drug Pepcid to 231 percent for the cholesterol drug Zocor.

“This price-gouging is outrageous and intolerable,” said Alisa Simon, director of health care organizing for Citizens for Consumer Justice. “Consumers should not have to choose between buying medicine and food, between paying their electric bills and their drug store charge accounts, between purchasing the drugs their doctors prescribe and living in pain and anxiety,” Simon said.

Consumers from Harrisburg and the surrounding area spoke about high prescription drug prices. Among them was Carol Martin.

“It’s embarrassing when I walk into a pharmacy and I have to ask how much my medications will cost before I know if I can buy them,” Martin said. “Sometimes I can’t pick up medication I’ve ordered because I realize I don’t have the money to pay for it because the medications are so expensive. I ’m not the only person with this problem. Something has to be done to lower prescription drug prices and it has to be done soon.”

“Senior citizens and people with disabilities are being victimized simply because they are not allowed to use their purchasing power as a group,” said Marty Berger, president of the Pennsylvania Council of Senior Citizens. “The Prescription Drug Fairness for Seniors Act would allow the 39 million Medicare recipients to get the lowest price drug companies now charge their best customers. Medicare already negotiates fair prices for doctor and hospital services. There’s no reason why it shouldn’t do the same with prescription drugs. We shouldn’t allow seniors and people with disabilities to be used as a cash cow by the drug industry.”

The Prescription Drug Fairness for Seniors Act (H.R. 664/S. 731), introduced by Rep. Tom Allen (D-Maine) and Sen. Tim Johnson (D-S.D.), would end price discrimination and let millions of seniors and disabled Americans on Medicare use their bulk buying power to receive fair drug prices. It would require pharmaceutical manufacturers to give local pharmacies the same “best” price for Medicare beneficiaries as they give their most favored customers. The groups consider the bill to be a necessary step towards adding a comprehensive prescription drug benefit to Medicare that is affordable for seniors and people with disabilities and for taxpayers.

“Why are Pennsylvania’s seniors and people with disabilities paying so much more than consumers in Canada or Mexico for the exact same drugs?” Simon asked. “Who is representing the interests of America’s consumers? It’s time that our elected officials do something about this problem by supporting the Allen-Johnson bill and ending the price gouging of Pennsylvania’s consumers.”

The pharmaceutical industry argues that high U.S. retail prices are necessary to fund research and development (R&D). The Public Citizen study, however, shows that profits are the highest priority for drug manufacturers — much higher than R&D. The prescription drug business was ranked the most profitable industry in 1998 by Fortune Magazine — even after R&D costs were considered. Despite these high profits, the prescription drug industry pays much less in federal taxes than other major industries, according to a study by the Congressional Research Service. Moreover, the CEOs of the top 10 pharmaceutical companies last year averaged $20 million each in annual compensation, including stock options, and together held nearly $1 billion in stock options.

“The pharmaceutical giants are making profits off the backs of Pennsylvania’s seniors and people with disabilities,” said Dan O’Sullivan, media coordinator for Public Citizen. “The profit rate of the top 10 drug companies was more than double the averag e of all other Fortune 500 industries. They make these unnaturally high profits by charging their highest prices to people who can’t do without their products. The time has come for drug companies to stop hurting the American people.”