Drug Costs

The Logic Behind AARP’s Public Drug-Pricing Campaign

January 23, 2020 11:56 am

The Center for Medicine in the Public Interest (CMPI) recently released an investigative report about the AARP’s “Stop Rx Greed” initiative. The report is authored by the group’s Founders Robert Goldberg and Peter Pitts, who previously were scholars at the Manhattan Institute and the Pacific Research Institute, respectively. Pitts also is a former Food and Drug Administration associate commissioner.


One of the most important lines in the report actually comes in its conclusion. Goldberg and Pitts argue the rationale for the AARP’s prescription drug campaign “is false” because the prices that American seniors pay are not rising. In fact, as the authors note, net drug prices have fallen for the last seven years.


Yet, the AARP has “constantly called for government action” to bring down drug costs. Specifically, the AARP supports drug importation (click here to read our latest blog post on that issue), federal government efforts to set the prices of prescription drugs, and legislation to alter the U.S. patent system for biopharmaceuticals. Goldberg and Pitts note the AARP does not support efforts to reform pharmacy benefit manager (PBM) practices or to pass on to seniors the $170 billion in rebates pharmaceutical companies provide to PBMs.


The two authors conclude these public policy positions would harm the senior citizens AARP is supposed to represent—but would enrich AARP itself because of the organization’s ties to UnitedHealthcare, which, based on revenue, is the largest health insurer in the world. (According to a congressional report that Goldberg and Pitts cite, UnitedHealthcare is AARP’s largest business partner.)


AARP allows UnitedHealthcare to sell Medicare Part D and Medicare Advantage plans under its brand. Currently, AARP Part D plans have 4.2 million members, which, according to Goldberg and Pitts, “is the second largest share of the stand-alone Part D plan market.” AARP-UnitedHealthcare Medicare Advantage plans have 5.7 million members, which is “the largest share of any Medicare Advantage products.”


Notably, AARP hiked premiums for its Medicare Part D plans by 68 percent between 2015-20. Goldberg and Pitts point out this increase happened at the same time that net brand drug prices declined by 52 percent.


In all, Goldberg and Pitts believe AARP, which is set up under IRS laws as nonprofit entity, “generates nearly $1 billion a year in rebates and royalties” from its partnership with insurance companies like UnitedHealthcare.


This windfall clearly clouds AARP’s judgement when it comes to the drug-pricing debate happening in Washington.


But don’t take our word for it.


The CMPI report cites a 2012 U.S. Senate study that included interviews with former AARP executives who admitted AARP generates much of its budget from insurance companies and who said that fact has “compromised the organization’s mission and independence.” Goldberg and Pitts also cite a 1996 New York Times story that said, “the policies that might be best for the elderly are not always the policies that are best” for the AARP’s bank account.