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Survey Shows Pharmaceutical Companies Price-Gouging

Oct. 27, 1999

Survey Shows Pharmaceutical Companies Price-Gouging
Seniors in Northern L.A.

Public Citizen and Congress of California Seniors Release Results
of Prescription Drug Pricing Survey

PASADENA, Calif. — Thousands of seniors in northern Los Angeles County without prescription drug coverage are being gouged when they buy their medicines, a new survey by the national consumer group Public Citizen and the Congress of California Seniors shows.

The survey of 28 randomly selected pharmacies in the 27th Congressional District compared the prices of the 10 most commonly prescribed prescription drugs used by senior citizens. The survey showed that local seniors are being charged retail prices that are more than double — 110 percent higher on average — than the prices that prescription drug makers charge their most favored customers such as HMOs, large insurers and certain federal agencies.

Overall, the average senior’s retail price for each of the 10 drugs was $186 versus $89 for the most favored customer. Overcharges ranged from 62 percent for the cholesterol drug Lipitor to 243 percent for Zocor, another cholesterol drug.

“This price-gouging is outrageous and intolerable,” said Marvin Schachter, president of the Advisory Council of the Los Angeles County Area Agency on Aging. “Many seniors have retired on fixed incomes and can’t afford to pay for the prescription drugs they need to stay alive and well.”

The groups released the report at a press conference outside Abbott Diagnostics, a division of Abbott Laboratories, which makes Prevacid, one of the drugs in the report. Prevacid, an ulcer medication, was the second-highest priced drug in the survey at $393 for a standard dosage, an overcharge of 140 percent.

One of the seniors who can talk about high prescription drug prices is Bernice Nivison. Nivison is waging a painful and frustrating battle with a severe ulcer. Her only income is $421 in Social Security. She has a small savings account, but it is being drained by a $270 monthly bill for just two medications, one of those being Prevacid.

“The price of these drugs is just appalling,” Nivison said. “Something must be done.”

Public Citizen and the Congress of California Seniors are calling on Congress to end price discrimination and let the millions of seniors and disabled Americans on Medicare use their bulk buying power to receive fair prescription drug prices. The groups support “The Prescription Drug Fairness for Seniors Act” (H.R. 664/S. 731), which would require pharmaceutical manufacturers to give local pharmacies the same “best” price for Medicare beneficiaries as they give their most favored customers.

The groups also support adding a comprehensive prescription drug benefit to Medicare. (Medicare, which provides health care coverage for people who are 65 and over or disabled, offers almost no outpatient prescription drug coverage.)

The pharmaceutical industry has argued that high U.S. retail prices are necessary to fund research and development (R&D). But the study shows that profits are a higher priority for drug manufacturers than R&D.

At the top 10 pharmaceutical firms, one-and-a-half times as much money was collected in profit in 1998 as was put into research and development, according to the report. The prescription drug business was ranked the most profitable industry in 1998 by Fortune Magazine — and the industry’s huge profits exist after R&D costs are paid. 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 generating their profits on the backs of America’s seniors,” said Frank Clemente, Director of Public Citizen’s Congress Watch. “Why is it that Microsoft, the most successful company in the world, is satisfied with a 27 percent profit rate while Abbott Laboratories feels the need to make more than 40 percent in profits? The drug companies are resorting to price-gouging California seniors to enhance their unnaturally high profits.”

The pharmaceutical industry doesn’t find it necessary to charge everyone high prices, however. Foreign customers get U.S.-made drugs at a fraction of the price paid by American seniors because their governments negotiate fair prices with prescription drug makers. Many seniors are forced to travel to Mexico or Canada to get reasonably priced medication, as shown on CBS’s Sixty Minutes on Sunday, Oct. 17.

“Why are we paying double the amount that seniors in Mexico and Canada are paying for the exact same drugs?”asked Lois Wellington, president of the Congress of California Seniors. “Who is representing the interests of California’s seniors? It’s about time that our members of Congress stand up to pharmaceutical companies by opposing price discrimination against Medicare beneficiaries and supporting the `Prescription Drug Fairness for Seniors Act.’ “