The U&C price, the retail price for a drug, is the price an individual  without prescription drug coverage would pay at a retail pharmacy. AWP is the average of the list prices or sticker price that a manufacturer of  a drug suggests wholesalers charge pharmacies. AMP is the average of prices paid to a manufacturer by wholesalers for a  drug distributed to the retail pharmacy class of trade, after subtracting any  account cash discounts or other price reductions. Retail Prices Increased from 2000 through 2004, with Larger Increases for Brand Than Generic Drugs

From January 2000 through December 2004, the average U&C prices for a  typical 30-day supply of 96 prescription drugs frequently used by BCBS  FEP Medicare and non-Medicare enrollees increased 24.5 percent. The average U&C prices for  50 frequently used brand drugs increased three times faster than the  average U&C prices for 46 frequently used generic drugs. U&C Prices for Drugs Frequently Used by Medicare Beneficiaries and by Non-Medicare Enrollees Increased at Similar Rates

From January 2000 through December 2004, the average U&C prices  collected by PACE and EPIC for 75 prescription drugs frequently used by  BCBS FEP Medicare beneficiaries increased at a similar rate as the  average U&C prices for 76 prescription drugs frequently used by BCBS  FEP non-Medicare enrollees. Ten brand drugs in each index, representing one-third or more of the  prescriptions for the 50 brand drugs, accounted for almost 50 percent of  the increase for the quarterly AMP, AWP, and U&C price indexes. Eight of  these 10 drugs were the same across all three price indexes. However, the  focus of our analysis was to examine price trends rather than price levels,  and U&C and AWP are consistent measures used to assess price trends. PACE and BCBS provided technical comments that we incorporated as  appropriate; EPIC stated that it did not have any comments. Appendix I: Scope and Methodology

To examine the change in retail prices for prescription drugs frequently  used by Medicare beneficiaries and other individuals with health  insurance, we used data from the Blue Cross and Blue Shield (BCBS)  Federal Employee Program (FEP) to select the 100 prescription drugs  most frequently dispensed through retail pharmacies in 2003 for BCBS  FEP Medicare enrollees and the 100 most frequently dispensed for BCBS  FEP non-Medicare enrollees. To examine the change in retail prices for frequently used drugs compared  to other drug price benchmarks, we compared an index based on the U&C  prices reported by PACE and EPIC for 50 brand drugs to indexes based on  the average manufacturer prices (AMP) and average wholesale prices  (AWP) for these 50 drugs on a quarterly basis from the first quarter of 2000  through the fourth quarter of 2004.
Why GAO Did This Study

Prescription drug spending has been the fastest growing segment of national health expenditures. As the federal government assumes greater financial responsibility for prescription drug expenditures with the introduction of Medicare part D, federal policymakers are increasingly concerned about prescription drug prices. GAO was asked to examine the change in retail prices and other pricing benchmarks for drugs frequently used by Medicare beneficiaries and other individuals with health insurance from 2000 through 2004. To examine the change in retail prices from 2000 through 2004, we obtained usual and customary (U&C) prices from two state pharmacy assistance programs for drugs frequently used by Medicare beneficiaries and non-Medicare enrollees in the 2003 Blue Cross and Blue Shield (BCBS) Federal Employee Program (FEP). The U&C price is the price an individual without prescription drug coverage would pay at a retail pharmacy. Additionally, we compared the change in U&C prices for brand drugs from 2000 through 2004 to the change in two pricing benchmarks: average manufacturer price (AMP), which is the average of prices paid to manufacturers by wholesalers for drugs distributed to the retail pharmacy class of trade, and average wholesale price (AWP), which represents the average of list prices that a manufacturer suggests wholesalers charge pharmacies.

What GAO Found

We found the average U&C prices at retail pharmacies reported by two state pharmacy assistance programs for a 30-day supply of 96 drugs frequently used by BCBS FEP Medicare and non-Medicare enrollees increased 24.5 percent from January 2000 through December 2004. Of the 96 drugs: Twenty drugs accounted for nearly two-thirds of the increase in the U&C price index; the increase in average U&C prices for 75 prescription drugs frequently used by Medicare beneficiaries was similar to the increase for 76 prescription drugs frequently used by non-Medicare enrollees; and the average U&C prices for 50 frequently used brand prescription drugs increased three times as much as the average for 46 generic frequently used prescription drugs. AWPs increased at a faster rate than AMPs and U&C prices for the 50 frequently used brand drugs from first quarter 2000 through fourth quarter 2004. Ten drugs in each index accounted for almost 50 percent of the increase for AMP, AWP, and U&C prices. Eight of these 10 drugs were consistent across the three price indexes. The Centers for Medicare & Medicaid Services (CMS), two state pharmacy assistance programs, and BCBS FEP reviewed a draft of this report. While CMS noted that U&C and AWP do not reflect discounts in a drug's price, this report's focus was to examine price trends rather than price levels. Technical comments were incorporated as appropriate.