This report responds to a Congressional request for information on trends in prices for prescription drugs frequently used by Medicare beneficiaries and other individual with health insurance. We obtained data from two state pharmaceutical assistance programs for the elderly on the usual and customary prices reported by retail pharmacies for selected drugs. The usual and customary price is the undiscounted price individuals without drug coverage would pay. We tracked monthly price trends from January 2000 through June 2004 for a total of 99 drugs, which include 77 drugs frequently used by certain Medicare enrollees and 79 drugs frequently used by certain non-Medicare enrollees. We also compared the price trends during this period separately for the 52 brand drugs and 47 generic drugs.

Overall, we found that the average usual and customary prices for 77 prescription drugs frequently used by Medicare enrollees increased 21.8 percent from January 2000 through June 2004, a 4.6 percent average annual rate of increase. During the same period, the average usual and customary prices for 79 drugs frequently used by non-Medicare enrollees increased at a similar rate--22.8 percent, a 4.8 percent average annual rate of increase. We also found that average usual and customary prices for 52 frequently used brand drugs increased about three times faster than for 47 frequently used generic drugs. Specifically, from January 2000 through June 2004, the average usual and customary prices for the brand drugs increased 26.4 percent, a 5.5 percent average annual rate of increase, whereas prices for generic drugs increased 8.3 percent, a 1.8 percent average annual rate of increase.