the AARP press release.
While the new study makes some mild concessions to prior methodological critiques, Dr. Schondelmeyer and Ms. Purvis again draw a completely specious comparison between drug prices and overall inflation. This unscrupulous misrepresentation is discouraging, especially when the media dutifully covers the "news." To be fair, even the New York Times has been shamed into presenting both sides of the story.
Read on for the depressing details and let me know if you agree.
BETTER, BUT STILL FLAWED
Many people, including yours truly, have criticized the obvious methodological flaws in the AARP price reports. For example, previous reports have included brand-name drug prices even after generic alternatives became available. A Different Perspective: The AARP Sponsored Schondelmeyer-Purvis Studies, a 2010 joint IMS-MIT study, does an excellent job of explaining why the AARP studies do not meet scientific standards.
In this latest iteration, Dr. Schondelmeyer and Ms. Purvis have addressed some of the critiques. For instance, the study finally acknowledges that the generic dispensing rate is above 0.0%. (Shocking, I know.)
The difference is dramatic. Here’s the chart from the August 2010 study, which included brand-name drugs only:
the March 2012 study, which included brand and generic drugs:
TORTURING THE DATA
Despite the bias, the March 2012 analysis shows drug prices roughly tracking the Consumer Price Index (CPI) ... until September 2008.
But wait. Did anything happen (besides the Presidential election) that could explain September 2008’s CPI drop, thereby rendering the results meaningless?
Well, as a matter of fact, the housing bubble popped and the economy tanked. (You may have heard something about it.) Way back in September 2008, I even provided Drug Channels readers with a cartoon guide to the subprime mortgage crisis in The Subprime Primer: A Brief Diversion. (Trust me, this cartoon is definitely worth your time.)
For those who don’t know, about 30% of the CPI is comprised of "Shelter," which is measured using two CPI indexes: (1) Owners’ equivalent rent of primary residence (OER), and (2) Rent of primary residence (Rent). See this BLS article for more details. Another 15% of the CPI is “Transportation,” including motor vehicles and fuel.
In 2008, the U.S. housing market tanked, oil prices dropped, and auto sales plummeted. Thus, almost half of the CPI components declined sharply for reasons that had nothing to do with the pharmaceutical industry or the election. A “cumulative CPI” that incorporates 2008-9 is an especially poor benchmark--unless you are trying to make a political point rather than a fact-based economic argument.
As my stats professor used to say: If you torture the data long enough, nature will confess.
P.S. There’s a lot more to the AARP than meets the eye. Check out Behind the Veil: The AARP America Doesn’t Know, a report by the U.S. House Ways and Means Subcommittee on Health. Scary stuff.