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entitled 'Prescription Drugs: Price Trends for Frequently Used Brand 
and Generic Drugs from 2000 through 2004' which was released on 
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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

August 2005: 

Prescription Drugs: 

Price Trends for Frequently Used Brand and Generic Drugs from 2000 
through 2004: 

GAO Highlights: 

Highlights of GAO-05-779, a report to congressional requesters: 

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.
* 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. 

Average Annual Percentage Change of AMP, AWP, and U&C Price Indexes for 
50 Brand Drugs Frequently Used by Enrollees in BCBS FEP, from First 
Quarter 2000 through Last Quarter 2004: 

[See PDF for image] 

[End of figure] 

www.gao.gov/cgi-bin/getrpt?GAO-05-779. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Marjorie Kanof at (202) 
512-7114 or kanofm@gao.gov. 

[End of section] 

GAO-05-779: 

Contents: 

Letter: 

Results in Brief: 

Background: 

Retail Prices Increased from 2000 through 2004, with Larger Increases 
for Brand Than Generic Drugs: 

AWPs Increased at a Faster Rate Than AMPs and U&C Prices for 50 Brand 
Drugs from 2000 through 2004: 

Concluding Observations: 

Agency and Other External Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Drugs Included in Analyses: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Ninety-Six Drugs Included in U&C Price Indexes, by Month, 
January 2000 through December 2004: 

Figures: 

Figure 1: Drug Prices for Different Buyers and Sellers: 

Figure 2: Index of Average U&C Prices for 96 Drugs Frequently Used by 
BCBS FEP Enrollees, by Month, 2000 through 2004: 

Figure 3: Annual Change in U&C Price Index for 96 Drugs Frequently Used 
by BCBS FEP Enrollees, 2000 through 2004: 

Figure 4: Indexes of Average U&C Prices for Drugs Frequently Used by 
BCBS FEP Medicare and Non-Medicare Enrollees, by Month, 2000 through 
2004: 

Figure 5: Indexes of Average U&C Prices for 50 Brand and 46 Generic 
Drugs Frequently Used by BCBS FEP Enrollees, by Month, 2000 through 
2004: 

Figure 6: Indexes of AMPs, AWPs, and Average U&C Prices for 50 Brand 
Drugs Frequently Used by BCBS FEP Enrollees, by Quarter, 2000 through 
2004: 

Figure 7: Comparison of 10 Drugs Accounting for the Largest Portions of 
Changes in AMP, AWP, and U&C Price Indexes for 50 Brand Drugs 
Frequently Used by BCBS FEP Enrollees, by Quarter, 2000 through 2004: 

Abbreviations: 

AMP: average manufacturer price: 
AWP: average wholesale price: 
BCBS: Blue Cross and Blue Shield: 
BLS: Bureau of Labor Statistics: 
CMS: Centers for Medicare & Medicaid Services: 
EPIC: Elderly Pharmaceutical Insurance Coverage: 
FEP: Federal Employee Program: 
NDC: National Drug Code: 
PACE: Pharmaceutical Assistance Contract for the Elderly: 
U&C: usual and customary: 

United States Government Accountability Office: 

Washington, DC 20548: 

August 15, 2005: 

The Honorable Olympia J. Snowe: 
Chair: 
Committee on Small Business and Entrepreneurship: 
United States Senate: 

The Honorable Ron Wyden: 
United States Senate: 

Prescription drug spending as a share of national health expenditures 
increased from 5.8 percent in 1993 to 10.7 percent in 2003 and was the 
fastest growing segment of health care expenditures.[Footnote 1] In 
addition to increasing utilization and the introduction of newer drugs, 
rising prescription drug prices are a key component of increasing drug 
expenditures. Increasing drug prices can affect consumers, employers, 
and federal and state governments. Policymakers are increasingly 
concerned about drug prices as the federal government will assume 
greater financial responsibility for prescription drug expenditures 
with the introduction of a prescription drug benefit to Medicare 
beneficiaries in January 2006, known as Medicare part D. Medicare 
beneficiaries also will continue to be responsible for a large share of 
drug costs under Medicare part D. 

Tracking prescription drug prices can be complicated by the different 
prices that different purchasers, such as consumers, insurers and other 
third-party payers, and wholesalers, pay for the same drug. Several 
price benchmarks represent these differing amounts paid by different 
purchasers. For example, individuals without prescription drug 
coverage, including Medicare beneficiaries who do not currently have 
drug coverage, may pay the full retail price at the pharmacy, known as 
the usual and customary (U&C) price. Insurers and other third-party 
payers, including state Medicaid programs, typically pay negotiated 
prices with retail pharmacies, often receiving discounts from the 
average wholesale price (AWP), commonly referred to as a list 
price.[Footnote 2] Retail pharmacies may obtain drugs directly from 
pharmaceutical manufacturers or through wholesalers. The average 
manufacturer price (AMP) represents the average of prices paid to 
manufacturers by wholesalers for drugs distributed to the retail 
pharmacy class of trade, and is used by the Centers for Medicare & 
Medicaid Services (CMS) to determine rebates due by law to Medicaid 
programs. Prices also substantially vary depending on whether drugs are 
marketed as brand or generic, with some third-party payers encouraging 
the use of less expensive generic drugs through lower cost sharing for 
consumers and other strategies. 

To provide a baseline of prescription drug prices before the 
implementation of the Medicare part D drug benefit, you asked GAO to 
review drug price changes from 2000 through 2004, including drugs 
frequently used by seniors. Specifically, we examined the following 
questions. 

1. How have retail prices for prescription drugs frequently used by 
Medicare beneficiaries and other individuals with health insurance 
changed from 2000 through 2004?

2. How does the change in retail prices for brand drugs frequently used 
by Medicare beneficiaries and other individuals compare to other drug 
pricing benchmarks from 2000 through 2004?

To examine the change in retail prices for prescription drugs 
frequently used by Medicare beneficiaries and other individuals with 
health insurance, we selected the 100 most frequently dispensed retail 
prescriptions in 2003 for Medicare beneficiaries and for non-Medicare 
enrollees in the Blue Cross and Blue Shield (BCBS) Federal Employee 
Program (FEP).[Footnote 3] Combined, these two lists of 100 frequently 
used drugs represented a total of 133 unique drugs. Of these 133 drugs, 
we analyzed 96 drugs (50 brand and 46 generic) for which we were able 
to obtain U&C prices at retail pharmacies for every month from January 
2000 through December 2004.[Footnote 4] These 96 drugs included 75 
drugs that were frequently used by BCBS FEP Medicare enrollees and 76 
drugs that were frequently used by BCBS FEP non-Medicare enrollees, 
with 55 of these drugs overlapping the Medicare and non-Medicare 
frequently used lists. To calculate a price index, we weighted each 
drug using the number of prescriptions dispensed to BCBS FEP enrollees 
in 2003. We collected the average monthly U&C prices for a typical 30-
day supply from two large state programs that assist low-income 
Medicare beneficiaries in purchasing prescription drugs: Pennsylvania's 
Pharmaceutical Assistance Contract for the Elderly (PACE) program from 
January 2000 through December 2004, and New York's Elderly 
Pharmaceutical Insurance Coverage (EPIC) program from August 2000 
through December 2004.[Footnote 5]

To compare the change in U&C prices at retail pharmacies with other 
drug-pricing benchmarks, we examined changes in the AMP and AWP for the 
50 brand drugs frequently used by BCBS FEP enrollees. We calculated a 
quarterly AMP index for a 30-day supply for the 50 brand drugs based on 
data we collected from CMS from the first quarter of 2000 through the 
fourth quarter of 2004. We calculated a quarterly AWP index for a 30-
day supply for the same 50 brand drugs based on data we collected from 
First DataBank for the same period. We determined that the data from 
BCBS FEP, PACE, EPIC, CMS, and First DataBank were sufficiently 
reliable for our purposes. Our analyses are limited to drugs most 
frequently used by Medicare beneficiaries and non-Medicare enrollees in 
the 2003 BCBS FEP, and our analyses using U&C prices are limited to 
prices reported by retail pharmacies in Pennsylvania to the PACE 
program and by retail pharmacies in New York to the EPIC program. See 
appendix I for more information about our selected drugs and detailed 
information on our methodology. We performed our work from April 2004 
through July 2005 in accordance with generally accepted government 
auditing standards.[Footnote 6]

Results in Brief: 

From January 2000 through December 2004, based on our analysis of data 
from PACE and EPIC, the average monthly U&C prices for a 30-day supply 
of 96 prescription drugs frequently used by BCBS FEP Medicare and non-
Medicare enrollees increased 24.5 percent. Twenty of the 96 drugs 
accounted for nearly two-thirds of the increase in the U&C price index. 
The average U&C prices for 75 prescription drugs frequently used by 
BCBS FEP Medicare beneficiaries and the average U&C prices for 76 
prescription drugs frequently used by BCBP FEP non-Medicare enrollees 
increased at similar rates of 24.0 percent and 24.8 percent, 
respectively. The average U&C prices for 50 brand prescription drugs 
increased 28.9 percent, three times as much as the average U&C price 
increase of 9.4 percent for 46 generic prescription drugs. 

The AWP index increased by 31.6 percent for the 50 frequently used 
brand drugs from the first quarter of 2000 through the fourth quarter 
of 2004--about 3 to 4 percentage points more rapidly than the AMP and 
U&C price indexes. Ten drugs in each index accounted for nearly 50 
percent of the increase for the AMP, AWP, and U&C indexes, with 8 of 
these top 10 drugs consistent for all three prices. As a result of 
AWP's faster rate of increase, AWP as a percentage of U&C price 
increased from an average of about 91 percent in the first quarter of 
2000 to about 94 percent in the last quarter of 2004. AMP stayed about 
72 percent of the U&C price during this period. 

We provided a draft of this report to CMS, PACE, EPIC, and BCBS FEP. 
CMS noted that U&C and AWP do not reflect discounts in a drug's price. 
While our analysis does not reflect these discounts, our focus was to 
examine price trends rather than price levels and U&C and AWP are 
consistent measures used to examine price trends. CMS also suggested 
that we examine the effect on prices when generic alternatives are 
introduced, but such an analysis was beyond the scope of this report. 
PACE and BCBS provided technical comments that we incorporated as 
appropriate; EPIC stated that it did not have any comments. 

Background: 

Several measures of price are commonly used within the health care 
sector to measure the price of prescription drugs. These varying price 
measures are due to the different prices that drug manufacturers and 
retail pharmacies charge different purchasers, and drug prices can vary 
substantially depending on the purchaser. (See fig. 1.)

* 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. The U&C price includes the acquisition cost of the drug paid 
by the retail pharmacy and a markup charged by the pharmacy. 

* AWP is the average of the list prices or sticker price that a 
manufacturer of a drug suggests wholesalers charge pharmacies. AWP is 
typically less than the U&C price, which includes the pharmacyís own 
markup. AWP is not the actual price that large purchasers normally pay. 
Nevertheless, AWP is part of the formula used by many state Medicaid 
programs and private third-party payers to reimburse retail 
pharmacies.[Footnote 7]

* 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.[Footnote 8] CMS uses AMP in determining rebates drug 
manufacturers must provide, as required by the Omnibus Budget 
Reconciliation Act of 1990, to state Medicaid programs as a condition 
for the federal contribution to Medicaid spending for the 
manufacturersí outpatient prescription drugs.[Footnote 9] For brand 
drugs, the minimum rebate amount is the number of units of the drug 
multiplied by 15.1 percent of the AMP. 

Figure 1: Drug Prices for Different Buyers and Sellers: 

[See PDF for image]

[A] U&C is the price an individual without prescription drug coverage 
would pay at a retail pharmacy. 

[B] When an insured consumer purchases a drug at a retail pharmacy, the 
pharmacy collects from the insured consumer the appropriate cost-
sharing amount and then submits a claim to the third-party payer for 
reimbursement. 

[C] Third-party payers often negotiate a discount off AWP, the average 
of the list prices that a manufacturer suggests wholesalers charge 
pharmacies. However, third-party payers may pay other negotiated rates 
not based on AWP. 

[D] Retail pharmacies can also purchase prescription drugs directly 
from manufacturers. 

[E] AMP represents the average of prices paid to manufacturers by 
wholesalers for drugs distributed to the retail pharmacy class of 
trade. 

[End of figure]

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 75 prescription drugs frequently used by 
Medicare beneficiaries and for 76 prescription drugs frequently used by 
non-Medicare enrollees increased at similar rates. 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 Frequently Used Drugs Increased 24.5 Percent: 

From January 2000 through December 2004, the average U&C price 
collected from retail pharmacies by PACE and EPIC for a 30-day supply 
for 96 prescription drugs frequently used by BCBS FEP Medicare 
beneficiaries and non-Medicare enrollees increased 24.5 percent, a 4.6 
percent average annual rate of increase. (See fig. 2.) During the same 
period, using nationwide data from the Bureau of Labor Statistics 
(BLS), prices for prescription drugs and medical supplies for all urban 
consumers increased 21.3 percent, a 4.0 percent average annual rate of 
increase. Additionally, using BLS data, prices for all consumer items 
for all urban consumers--the Consumer Price Index--increased 12.7 
percent, a 2.5 percent average annual rate of increase from January 
2000 through December 2004. 

Figure 2: Index of Average U&C Prices for 96 Drugs Frequently Used by 
BCBS FEP Enrollees, by Month, 2000 through 2004: 

[See PDF for image]

[End of figure]

While U&C prices increased each year from 2000 through 2004, the 
greatest annual rate of increaseó6.1 percentóoccurred from January 2002 
to January 2003. (See fig. 3.) Since then, annual rates of increase 
have been less, increasing 5.2 percent from January 2003 to January 
2004 and 4.2 percent from January 2004 to December 2004.[Footnote 10]

Figure 3: Annual Change in U&C Price Index for 96 Drugs Frequently Used 
by BCBS FEP Enrollees, 2000 through 2004: 

[See PDF for image]

Note: The change in average U&C prices from January 2004 through 
December 2004 is expressed as an annual percentage change. 

[End of figure]

Twenty drugs, representing 33 percent of BCBS FEP prescriptions for the 
96 drugs we reviewed, accounted for 64 percent of the total increase in 
the U&C price index from January 2000 through December 2004.[Footnote 
11] The drug with the largest effect on the price index was Lipitor 
10mg, which accounted for 6.6 percent of the total increase. Nineteen 
of the 20 drugs were brand drugs and 1 was a generic drug, 
Hydrocodone/Acetaminophen 5/500mg. The twenty drugs accounting for the 
largest changes in the U&C price index are listed below. 

* Lipitor 10mg: 

* Celebrex 200mg: 

* Plavix 75mg: 

* Prevacid 30mg: 

* Lipitor 20mg: 

* Ambien 10mg: 

* Zocor 20mg: 

* Levaquin 500mg: 

* Hydrocodone/Acetaminophen 5/500mg: 

* Flonase 0.05mg: 

* Zithromax 250mg: 

* Wellbutrin SR 150mg: 

* Singular 10mg: 

* Premarin 0.625mg: 

* Celexa 20mg: 

* Zoloft 50mg: 

* Evista 60mg: 

* Norvasc 5mg: 

* Neurontin 300mg: 

* Aciphex 20mg: 

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.[Footnote 12] (See fig. 4.) The prices of 75 
Medicare drugs increased 24.0 percent, a 4.5 percent average annual 
rate of increase. The prices of 76 non-Medicare drugs increased 24.8 
percent, a 4.6 percent average annual rate of increase.[Footnote 13]

Figure 4: Indexes of Average U&C Prices for Drugs Frequently Used by 
BCBS FEP Medicare and Non-Medicare Enrollees, by Month, 2000 through 
2004: 

[See PDF for image]

[End of figure]

U&C Prices Increased Three Times Faster for Brand Drugs Than for 
Generic Drugs: 

From January 2000 through December 2004, the average U&C price (based 
on PACE and EPIC data) for 50 frequently used brand drugs rose three 
times faster than the average U&C price for 46 frequently used generic 
drugs. (See fig. 5.) Specifically, the average U&C price for brand 
drugs increased 28.9 percent, a 5.3 percent average annual rate of 
increase, whereas U&C prices for generic drugs increased 9.4 percent, a 
1.8 percent average annual rate of increase. 

Figure 5: Indexes of Average U&C Prices for 50 Brand and 46 Generic 
Drugs Frequently Used by BCBS FEP Enrollees, by Month, 2000 through 
2004: 

[See PDF for image]

[End of figure]

AWPs Increased at a Faster Rate Than AMPs and U&C Prices for 50 Brand 
Drugs from 2000 through 2004: 

From the first quarter of 2000 through the fourth quarter of 2004, AMPs 
and U&C prices for the 50 brand drugs increased at similar rates, but 
AWPs increased at a faster rate. The quarterly AWPs for 50 brand 
prescription drugs increased 31.6 percent, a 6.0 percent average annual 
rate of increase. For these same 50 drugs, the quarterly AMPs increased 
28.2 percent, a 5.4 percent average annual rate of increase, while the 
average quarterly U&C prices increased 27.5 percent, a 5.2 percent 
average annual rate of increase.[Footnote 14] Over the entire period, 
the AWP index increased about 3 to 4 percentage points more than the 
AMP or U&C price indexes. (See fig. 6.)

Figure 6: Indexes of AMPs, AWPs, and Average U&C Prices for 50 Brand 
Drugs Frequently Used by BCBS FEP Enrollees, by Quarter, 2000 through 
2004: 

[See PDF for image]

[End of figure]

The difference between the levels of AWP and U&C prices for brand drugs 
narrowed slightly during the time period we analyzed. Whereas in the 
first quarter of 2000 AWP was on average about 91 percent of the U&C 
price for the same drug, by the fourth quarter of 2004 AWP was on 
average about 94 percent of the U&C price. In contrast, AMP stayed a 
similar portion of U&C in first quarter 2000 and fourth quarter 2004, 
with the AMP on average about 72 percent of the U&C price. 

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. 
The drug accounting for the largest portion of the change in the AMP 
and AWP indexes was Celebrex 200mg, accounting for 8.6 percent of the 
increase for AMP and 7.5 percent for AWP. Lipitor 10mg was the drug 
accounting for the largest portion of the change in the quarterly U&C 
price index and accounted for 7.2 percent of the increase for the 50 
brand drugs. (See fig. 7.)

Figure 7: Comparison of 10 Drugs Accounting for the Largest Portions of 
Changes in AMP, AWP, and U&C Price Indexes for 50 Brand Drugs 
Frequently Used by BCBS FEP Enrollees, by Quarter, 2000 through 2004: 

[See PDF for image]

[End of figure]

Concluding Observations: 

From 2000 through 2004, retail prices for drugs frequently used by 
Medicare beneficiaries increased 24.0 percent--an average rate of 4.5 
percent per year. In general, higher drug prices mean higher spending 
by consumers and health insurance sponsors, including employers and 
federal and state governments. With brand drug prices increasing three 
times as fast as generic drug prices, public and private health 
insurance sponsors will likely continue to focus on strategies to 
encourage increased use of generic drugs when available. Starting in 
2006, with the introduction of the Medicare prescription drug benefit, 
Medicare will be paying claims for a wider array of drugs and, as a 
result, the federal government will be affected more than previously by 
rising drug prices. 

We found that from 2000 through 2004, on average the AWPs for 50 
frequently used brand drugs rose 0.8 percent per year faster than the 
retail prices for these same drugs. A continuation of this difference 
between AWP and retail prices increases could affect many Medicaid 
programs and private third-party payers that base their reimbursement 
of drug claims on AWPs. 

Agency and Other External Comments: 

We provided a draft of this report to CMS, PACE, EPIC, and BCBS FEP. In 
commenting on this report, CMS highlighted the discounts and price 
information tools that will be available under the Medicare drug 
benefit. CMS also stated that neither the U&C price nor AWP reflect 
discounts, such as manufacturers' discount programs, or other price 
concessions affecting a drug's price. We noted in the report that U&C 
represents the retail pharmacy price paid by consumers without 
insurance. The U&C does not reflect prices available from other 
sources, such as mail order pharmacies. We also noted that AWP is a 
list price that is not the actual price paid by large purchasers. We 
agree that consumers may be able to obtain lower prices than reflected 
by the U&C and AWP. 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. Further, increases in the 
published AWP may increase what many public or private third-party 
purchasers pay for prescription drugs because AWP is often included in 
the formula to calculate payments to pharmacies. 

Additionally, CMS suggested that we examine the effect on prices when 
generic alternatives are introduced. We agree that the introduction of 
generic drugs can reduce consumer payments for drugs. Examining changes 
in consumer spending for drugs, which are also affected by changes in 
utilization and the introduction of new drug alternatives, would be 
useful, but was beyond the scope of this report in examining price 
trends for frequently-used brand and generic drugs. 

PACE and BCBS provided technical comments that we incorporated as 
appropriate; EPIC stated that it did not have any comments. 

As agreed with your offices, unless you publicly announce the contents 
earlier, we plan no further distribution of this report until 30 days 
after its date. We will then send copies of this report to the 
Administrator of CMS and other interested parties. We will also provide 
copies to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at http://www.gao.gov. 

If you or your staffs have any questions about this report, please call 
me at (202) 512-7114 or kanofm@gao.gov. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made major contributions to this 
report are listed in appendix III. 

Signed by: 

Marjorie Kanof: 
Managing Director, Health Care: 

[End of section]

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.[Footnote 15] Combined, these two lists 
included 133 unique drugs.[Footnote 16]

We obtained average monthly usual and customary (U&C) prices reported 
by retail pharmacies to Pennsylvania's Pharmaceutical Assistance 
Contract for the Elderly (PACE) program from January 2000 through 
December 2004 and New York's Elderly Pharmaceutical Insurance Coverage 
(EPIC) program from August 2000 through December 2004.[Footnote 
17],[Footnote 18] We collected prices based on a specific strength, 
dosage form, and common number of units (such as pills), typically for 
a 30-day supply.[Footnote 19] Based on combined PACE and EPIC data, 96 
of the 133 drugs we selected had prices reported for every month from 
January 2000 through December 2004. We analyzed price trends on a 
monthly basis from January 2000 through December 2004 for these 96 
drugs.[Footnote 20]

Of the 96 drugs, 75 were among those most frequently used by BCBS FEP 
Medicare enrollees, and 76 were among those most frequently used by 
BCBS FEP non-Medicare enrollees. Fifty-five of the 96 drugs were 
frequently used by both BCBS Medicare enrollees and non-Medicare 
enrollees.[Footnote 21] We first determined the total number of 
prescriptions in 2003 for the drugs we selected dispensed to BCBS FEP 
Medicare enrollees and the total number of prescriptions dispensed to 
BCBS FEP non-Medicare enrollees. Separately for drugs frequently used 
by Medicare and by non-Medicare enrollees, we calculated the share of 
the total number of BCBS FEP prescriptions attributed to each drug. The 
price of each drug was then weighted by its relative share of total 
Medicare or total non-Medicare prescriptions in 2003 to calculate the 
average price for frequently used Medicare drugs and the average price 
for frequently used non-Medicare drugs for each month from January 2000 
through December 2004.[Footnote 22],[Footnote 23] We standardized these 
averages to create a Medicare price index and a non-Medicare price 
index, each with a value of 100 as of January 2000. 

We also separately analyzed monthly trends in U&C prices for brand and 
generic drugs frequently used by BCBS FEP enrollees. Of the 96 drugs, 
50 were brand drugs and 46 were generic drugs. Similar to our 
calculation of Medicare and non-Medicare price indexes, we calculated 
indexes for brand drugs and generic drugs based on each drug's share of 
the total number of brand or generic prescriptions dispensed to BCBS 
FEP enrollees in 2003. 

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.[Footnote 24] The 
Centers for Medicare & Medicaid Services (CMS) requires manufacturers 
to report AMP within 30 days of the end of each calendar quarter. 
Manufacturers submit AWPs on a periodic basis to publishers of drug-
pricing data, such as First DataBank. Using the National Drug Codes 
(NDC)[Footnote 25] reported by PACE and EPIC for the U&C prices for the 
50 brand drugs, we obtained per unit AMPs from CMS and per unit AWPs 
from First DataBank associated with each NDC.[Footnote 26] For each 
drug, we calculated a quarterly AMP and a quarterly AWP by multiplying 
the per unit price by the most common number of units for a 30-day 
supply.[Footnote 27] We created an AMP and AWP index by weighting the 
50 brand drugs by the number of prescriptions in 2003 from BCBS FEP. 
Similarly, we recalculated the U&C price for the 50 brand drugs on a 
quarterly basis to make comparisons to AMP and AWP. 

We also determined how much each drug's change in price contributed to 
the overall change in price for the 50 brand drugs for AMPs, AWPs, and 
U&C prices. We measured the share each drug contributed to the overall 
index by comparing the ratio of (1) each drug's price change from 
January 2000 through December 2004 multiplied by its weight based on 
BCBS FEP prescriptions, to (2) the sum of all drugs price changes 
multiplied by their associated weights. 

Our analyses are limited to drugs most frequently used by Medicare 
beneficiaries and by non-Medicare enrollees in the 2003 BCBS FEP. 
Additionally, our analyses using U&C prices are limited to prices 
reported by retail pharmacies in Pennsylvania to the PACE program and 
by retail pharmacies in New York to the EPIC program. We reviewed the 
reliability of data from BCBS FEP, CMS, First DataBank, EPIC, and PACE, 
including screening for outlier prices in the PACE and EPIC data and 
ensuring that the price trends and frequently used drugs were 
consistent with other data sources. We determined that these data were 
sufficiently reliable for our purposes. We performed our work from 
April 2004 through July 2005 in accordance with generally accepted 
government auditing standards. 

[End of section]

Appendix II: Drugs Included in Analyses: 

Table 1 lists the 96 drugs used in constructing monthly U&C price 
indexes from January 2000 through December 2004. Fifty of the 96 drugs 
are brand drugs and were also used in examining price changes in AMP, 
AWP, and U&C on a quarterly basis from first quarter 2000 through 
fourth quarter 2004. Of the 96 drugs, 75 were frequently used by 
Medicare beneficiaries and 76 were frequently used by non-Medicare 
enrollees, with 55 of these drugs frequently used by both Medicare 
beneficiaries and non-Medicare enrollees. 

Table 1: Ninety-Six Drugs Included in U&C Price Indexes, by Month, 
January 2000 through December 2004: 

Drug name and strength: Acetaminophen/Codeine 30/300mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Aciphex 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 tablets 
delayed release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Albuterol 90mcg; 
Units dispensed and dosage form for a typical 30-day supply: 17gm 
aerosol; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Allegra-D 60-120 mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 tablets 
extended release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Allopurinol 300mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Alprazolam 0.25mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Alprazolam 0.5mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Ambien 5mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Ambien 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Amoxicillin 500mg; 
Units dispensed and dosage form for a typical 30-day supply: 21 
capsules; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Aricept 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Atenolol 25mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Atenolol 50mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Carisoprodol 350mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Celebrex 200mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
capsules; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Celexa 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Cephalexin 500mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
capsules; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Cipro 500mg; 
Units dispensed and dosage form for a typical 30-day supply: 20 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Clonazepam 0.5mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Combivent 103-18mcg; 
Units dispensed and dosage form for a typical 30-day supply: 14.7gm 
aerosol; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Cosopt 2-0.5%; 
Units dispensed and dosage form for a typical 30-day supply: 5mL 
solution; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Coumadin 5mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Cozaar 5mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Cyclobenzaprine HCl 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Doxycycline Hyclate 100mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
capsules; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Effexor XR 75mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
capsules extended release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Effexor XR 150mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
capsules extended release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Evista 60mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Flomax 0.4mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
capsules; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Flonase 0.05mg; 
Units dispensed and dosage form for a typical 30-day supply: 16gm 
spray; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Folic Acid 1mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Furosemide 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Furosemide 40mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Hydrochlorothiazide 25mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Hydrocodone/Acetaminophen 5/500mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Hydrocodone/Acetaminophen 7.5/500mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Hydrocodone/Acetaminophen 7.5/750mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Ibuprofen 800mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Isosorbide Mononitrate 30mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 tablets 
extended release; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Isosorbide Mononitrate 60mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 tablets 
extended release; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Klor-Con 10 10mEq; 
Units dispensed and dosage form for a typical 30-day supply: 30 tablets 
extended release; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Lanoxin 125mcg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Lanoxin 250mcg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Levaquin 500mg; 
Units dispensed and dosage form for a typical 30-day supply: 10 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Lipitor 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Lipitor 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Lipitor 40mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Lorazepam 0.5mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Lorazepam 1mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Meclizine HCl 125mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Methylprednisolone 4mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Metoprolol Tartrate 50mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Miralax 17gm; 
Units dispensed and dosage form for a typical 30-day supply: 255gm 
powder; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Naproxen 500mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Nasacort AQ 55mcg; 
Units dispensed and dosage form for a typical 30-day supply: 16.5gm 
spray; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Nasonex 50mcg; 
Units dispensed and dosage form for a typical 30-day supply: 17gm 
spray; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Neurontin 300mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
capsules; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Norvasc 5mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Norvasc 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Oxycodone/Acetaminophen 5/325mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Paxil 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Penicillin V Potassium 500mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Plavix 75mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Potassium Chloride 10mEq; 
Units dispensed and dosage form for a typical 30-day supply: 60 
capsules extended release; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Potassium Chloride 10mEq; 
Units dispensed and dosage form for a typical 30-day supply: 30 tablets 
extended release; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Pravachol 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Pravachol 40mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Prednisone 5mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Prednisone 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 35 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Prednisone 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Premarin 0.625mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Prevacid 30mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
capsules delayed release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Promethazine HCl 25mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Propoxyphene Napsylate/Acetaminophen 100/650mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Ranitidine HCl 150mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Singulair 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Spironolactone 25mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Sulfamethoxazole/Trimethoprim 800/160mg; 
Units dispensed and dosage form for a typical 30-day supply: 20 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Synthroid 50mcg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Synthroid 75mcg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Synthroid 100mcg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Toprol XL 50mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 tablets 
extended release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Toprol XL 100mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 tablets 
extended release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Trazodone HCl 50mg; 
Units dispensed and dosage form for a typical 30-day supply: 90 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Triamterene/Hydrochlorothiazide 37.5/25mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
capsules; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Triamterene/Hydrochlorothiazide 37.5/25mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Both. 

Drug name and strength: Warfarin Sodium 5mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Generic; 
Medicare or non-Medicare: Medicare. 

Drug name and strength: Wellbutrin SR 150mg; 
Units dispensed and dosage form for a typical 30-day supply: 60 tablets 
extended release; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Xalatan 0.005%; 
Units dispensed and dosage form for a typical 30-day supply: 2.5mL 
solution; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Zithromax 200mg/5mL; 
Units dispensed and dosage form for a typical 30-day supply: 30 
suspension; 
Brand or generic: Brand; 
Medicare or non-Medicare: Non-Medicare. 

Drug name and strength: Zithromax 250mg; 
Units dispensed and dosage form for a typical 30-day supply: 6 tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Zocor 20mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Zocor 40mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Zoloft 50mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Zoloft 100mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Drug name and strength: Zyrtec 10mg; 
Units dispensed and dosage form for a typical 30-day supply: 30 
tablets; 
Brand or generic: Brand; 
Medicare or non-Medicare: Both. 

Source: GAO analysis of data from BCBS FEP, EPIC, and PACE. 

[End of table]

[End of section]

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Marjorie Kanof (202) 512-7114 or kanofm@gao.gov: 

Acknowledgments: 

In addition to the contact named above, John E. Dicken, Director; 
Rashmi Agarwal; Jessica L. Cobert; Martha Kelly, Matthew L. Puglisi; 
and Daniel S. Ries made key contributions to this report. 

FOOTNOTES

[1] Our calculations are based on data from the national health 
accounts prepared by the Centers for Medicare & Medicaid Services, 
Office of the Actuary, National Health Statistics Group. 

[2] The AWP is the average of the list prices that a manufacturer 
suggests wholesalers charge pharmacies. 

[3] We used data of frequently dispensed prescriptions from BCBS FEP 
because they represent a large number of retail prescriptions dispensed 
and could provide data for drugs used by FEP enrollees who were 
Medicare beneficiaries and those who were not Medicare eligible. Of the 
nearly 55 million retail prescriptions dispensed to BCBS FEP enrollees 
in 2003, 21 million were for FEP enrollees who were also Medicare 
beneficiaries. 

[4] For the purpose of this report, we refer to single-source and 
multisource drugs that are marketed under a proprietary, trademark-
protected name as brand drugs. Single-source drugs include those brand 
drugs that have no generic equivalent on the market and are generally 
available from only one manufacturer. Brand multisource drugs include 
those brand drugs that have generic equivalents available from multiple 
manufacturers and are marketed under their brand name. Generic drugs 
include multisource drugs that are chemically identical to their 
branded counterparts and are generally marketed by multiple 
manufacturers under a non-proprietary name. 

[5] We used data from PACE and EPIC because they were two of the 
largest state pharmaceutical assistance programs, collected data from 
pharmacies on U&C prices for drugs, and had historical price data 
available from 2000. 

[6] We also reported on trends in U&C prices for 99 drugs from January 
2000 through June 2004 in GAO, Prescription Drugs: Trends in Usual and 
Customary Prices for Drugs Frequently Used by Medicare and Non-Medicare 
Enrollees, GAO-05-104R (Washington, D.C.: Oct. 6, 2004). This report 
includes 3 fewer drugs than our earlier analysis because pricing data 
were not available for these 3 drugs through December 2004. 

[7] Before 2005, Medicare reimbursement for prescription drugs covered 
under Medicare part B was based on AWP. The average sales price 
generally replaced AWP as the basis for outpatient drug reimbursement 
under Medicare part B beginning in 2005. The average sales price is 
defined for each drug as a manufacturer's sales to all purchasers in a 
given quarter, net of discounts and rebates and excluding certain 
government and other purchasers, divided by the number of units of the 
drug sold by the manufacturer in that quarter. Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 
§ 303(c), 117 Stat. 2066, 2239-2245 (to be codified at 42 U.S.C. § 
1395w-3a). 

[8] AMP does not include prices to government purchasers based on the 
Federal Supply Schedule, which are prices for prescription drugs 
negotiated with manufacturers by the Department of Veterans Affairs. 
AMP also does not include prices from direct sales to health 
maintenance organizations and hospitals or prices to wholesalers when 
they relabel drugs they purchase under their own label. 

[9] Pub. L. No. 101-508, § 4401, 104 Stat. 1388, 1388-156 (codified as 
amended at 42 U.S.C. § 1396r-8(k) (2000)). 

[10] The change in average U&C prices from January 2004 through 
December 2004 is expressed as an annual percentage change. 

[11] We measured the share each drug contributed to the overall index 
by comparing the ratio of (1) each drug's price change from January 
2000 through December 2004 multiplied by its weight based on BCBS FEP 
prescriptions, to (2) the sum of all drugs' price changes multiplied by 
their associated weights. 

[12] While 55 drugs were used in calculating both the Medicare and non-
Medicare U&C price indexes, each drug had a different weight in each 
index depending on the frequency of prescriptions dispensed to BCBS FEP 
Medicare enrollees or BCBS FEP non-Medicare enrollees. 

[13] We found the non-Medicare index rose slightly faster than the 
Medicare index, in part because drugs that treat depression were 
present to a larger extent in the non-Medicare index. The U&C prices 
for the eight drugs that treat depression increased at an average rate 
of 31.1 percent from January 2000 through December 2004. Excluding the 
eight drugs that treat depression from our analysis resulted in a 24.0 
percent rate of increase for both the Medicare and non-Medicare index. 

[14] The quarterly U&C price index increased at a slightly lower rate 
of increase than the monthly U&C price index because the base and end 
periods differ. Whereas the base period for the monthly U&C index is 
January 2000, the base period for the quarterly index is January 
through March 2000. Similarly, the end period for the monthly index is 
December 2004 and for the quarterly index is October through December 
2004. 

[15] BCBS FEP covered nearly 55 million prescriptions dispensed to 
enrolled federal employees, retirees, and their dependents at retail 
pharmacies in 2003, including 21 million prescriptions for FEP 
enrollees who were also Medicare beneficiaries. The 96 drugs that we 
included in our analyses represented about 32 percent of total 
prescriptions dispensed to BCBS FEP enrollees in 2003. Of these 96 
drugs, 50 were brand drugs and represented about 17 percent of total 
prescriptions dispensed to BCBS FEP enrollees in 2003. 

[16] Drugs with the same name but with different forms (such as 
capsules or tablets) or number of units dispensed were counted 
separately as unique drugs. 

[17] PACE covered more than 9 million prescriptions and EPIC covered 
nearly 10 million prescriptions dispensed to mostly low-income seniors 
in 2003. As of June 2005, PACE officials reported that approximately 
2,800 retail pharmacies--95 percent of pharmacies in Pennsylvania--
participated in PACE, while EPIC officials reported approximately 4,150 
retail pharmacies--87 percent of pharmacies in New York--participated 
in EPIC. 

[18] We merged price data from PACE and EPIC for August 2000 through 
December 2004, but report price data from PACE alone for January 2000 
through July 2000. Because the average of the U&C prices reported by 
PACE and by EPIC were nearly identical, we do not believe that 
including the EPIC data beginning in August 2000 notably affected the 
price trend. 

[19] The Department of Veterans Affairs Pharmacy Benefits Management 
Strategic Healthcare Group provided the most common number of units for 
a retail prescription for a 30-day supply. 

[20] We also analyzed price trends for 117 drugs that had prices 
reported for every month from January 2002 through December 2004, which 
had an average annual rate of increase of 5.2 percent. For the 96 drugs 
that had reported prices for every month from January 2000 through 
December 2004, the average annual rate of increase from January 2002 
through December 2004 was also 5.2 percent. 

[21] While these 55 drugs were used in calculating both the Medicare 
and non-Medicare U&C price indexes, they had different weights in each 
index depending on the frequency of prescriptions dispensed to BCBS FEP 
enrollees who were either Medicare beneficiaries or not Medicare 
eligible. 

[22] BCBS FEP retail prescriptions represent various days supply (such 
as 34-or 90-day supply), while PACE and EPIC price data we obtained are 
limited only to retail prescriptions for a typical 30-day supply. Over 
half of BCBS FEP retail prescriptions are for a 30-day supply. 

[23] The 2003 BCBS FEP retail prescription drug weights applied to PACE 
and EPIC retail prices for 96 drugs from January 2000 through December 
2004 were held constant throughout the entire period of the analysis. 
We also obtained 2004 BCBS FEP retail prescription data for 89 of the 
96 drugs and found almost no difference in the change in the U&C price 
index for the 89 drugs using constant 2003 or 2004 BCBS FEP drug 
weights throughout the period of analysis. 

[24] These 50 brand drugs were frequently used by Medicare 
beneficiaries and non-Medicare enrollees in the BCBS FEP in 2003 and 
had reported U&C prices to PACE and EPIC for every month from January 
2000 through December 2004. 

[25] NDCs are three segment numbers that are the universal product 
identifiers for drugs for human use; the U.S. Food and Drug 
Administration assigns the first segment of the NDC, which identifies 
the firm that manufacturers, repackages, or distributes a drug. The 
second segment identifies a specific strength, dosage form, and 
formulation for a particular firm and the third segment identifies 
package size. A single drug can have multiple NDCs associated with it. 
For example, a drug made by one manufacturer, in one form or strength, 
but in three package sizes would have three NDCs. 

[26] We obtained quarterly AMPs from CMS for each two-segment NDC, 
represented by 9 digits (not accounting for package size), associated 
with the 50 brand drugs from the first quarter of 2000 through the 
fourth quarter of 2004. Similarly, we obtained monthly AWPs from First 
DataBank for each three-segment NDC, represented by 11 digits, 
associated with the 50 brand drugs from first quarter 2000 through 
fourth quarter 2004. Specifically, we obtained the AWP effective on the 
last day of each month for each 11-digit NDC. 

[27] For brand drugs with multiple 9-digit NDCs, we calculated an 
average quarterly AMP for the drug weighted by the number of PACE and 
EPIC prescriptions for each 9-digit NDC during that quarter. For brand 
drugs with multiple 11-digit NDCs, we calculated an average monthly AWP 
for the drug weighted by the number of PACE and EPIC prescriptions 
during that month. We created a quarterly AWP by taking a simple 
average of the three monthly prices in each quarter. 

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