Placeholder Banner

Reality Check for AARP

February 29, 2016
This morning, AARP released yet another misleading report on prescription drug prices that ignores key facts about the marketplace for medicines. The report suffers from several notable flaws. Most glaringly, AARP underplays the value of the Medicare Part D program and ignores the stability in the program brought about by market competition:

  • Average annual out of pocket spending on drugs for Medicare Part D beneficiaries has fallen in recent years, declining 16 percent between 2007 and 2012, from $468 per beneficiary to $392.

  • Monthly premiums for Medicare Part D have been remained at about the same level for the past decade. In 2006, the average monthly premium was $32.20, compared to $34.10 today.

In reviewing AARP’s report, other facts to bear in mind include the following:

First, the report relies upon prices reported by pharmacy benefit managers (PBMs) to insurers, prices that do not necessarily include the often substantial rebates paid by drug manufacturers to PBMs.

Second, the report fails to consider the large cost savings medicines generate in other areas of the healthcare system by, for example, reducing hospital stays and physician office visits.  Consider the following: In 2011, a study published in Health Affairs found that for patients with congestive heart failure who took their medicines as directed by their physicians, the benefit-to-cost ratio was 8 to 1.  In other words, for every $1 they spent on medicine, they SAVED eight times that much in reduced costs in other parts of the healthcare system.  Similarly, for diabetes patients, the benefit-cost ratio was 6:1 - spend a dollar, save six. A similar trend was seen for patients with other chronic conditions like hypertension and dyslipidemia. A paper from the National Bureau of Economic Research found that overall, a $1 increase in prescription drug spending is associated with a $2.06 reduction in Medicare spending.

Third, it’s important to note that AARP is far from the disinterested and pure advocate for seniors it pretends to be when the organization talks about drug prices. AARP earns hundreds of millions of dollars annually from UnitedHealthcare, which offers AARP-endorsed insurance products in the Medicare Advantage, Medicare Prescription Drug Plans and Medigap programs. These close financial ties to the insurance industry raise serious questions about whether AARP is focused on serving their own financial interests at the expense of their members. Seniors deserve access to the innovative medicines that are available today and baby boomers will be well served indeed by the ability of biopharmaceutical companies to develop the next generation of medicines to prevent, treat, or cure the chronic diseases they face. It is unfortunate that AARP seems to be more concerned with its own bottom line than the health and well-being of current and future seniors.