AARP has a conflict of interest on drug pricing

AARP is the nation’s biggest and most influential advocacy group for seniors. It has about 38 million members — more than 11% of the U.S. population. From lobbying for better conditions in nursing homes to getting travel discounts for members, the organization has done much to help retired people over the years.

When it comes to one of AARP’s signature products, though, it may not always be putting its members first.

The problem is that the organization is dependent on revenue from insurance companies. And while sometimes the interests of insurance companies and seniors align, at times they don’t. This potential for conflict of interest has become starkly visible in recent months, as Congress seeks to pass drug pricing measures that would hurt seniors — and help insurers.

Let’s pull back the curtain. AARP earned $1.7 billion in revenue last year. About 45% — $752 million — came from deals between the organization and insurance companies to sell AARP-branded plans. AARP gets paid every time one of its members signs up for one of these branded policies.

Millions of Americans trust the AARP name, making these insurance plans highly popular. More than 10 million seniors hold health plans just through AARP’s partnership with insurance giant UnitedHealthcare, according to a recent report from the Center for Medicine in the Public Interest.

That means AARP has a vested interest in insurance companies getting their way in policy debates, regardless of the outcome for seniors.

This may account for the organization’s support of the $2 trillion Build Back Better Act.

The bill would make a host of sweeping changes to Medicare, the federal health insurance program that serves some 60 million seniors. One such change would allow the government to impose price controls on prescription drugs — a move that’s expected to save the federal government about $160 billion over a decade.

It would also save insurers billions of dollars — both by making medicines cheaper for those that sponsor Medicare drug plans and by giving the companies more leverage to demand lower drug prices for their other plans as well.

Unfortunately, though, the drug pricing measures in the bill are not designed to actually save money for patients. And they could have a devastating impact on seniors.

Specifically, the price caps would slash drug company revenue, dismantling their business model in one fell swoop. Research and development budgets would quickly shrink. Analysts at the nonpartisan Congressional Budget Office have evaluated several proposed price-cap measures and concluded that they would slightly decrease the development of new treatments and reduce access to many advanced medicines.

Moreover, a study by a University of Chicago economist estimated that an earlier version of the drug pricing bill would prevent up to 342 new drugs from being invented over the next two decades.

Yet AARP has spoken favorably about the Build Back Better drug pricing plan. At the same time, it opposes letting consumers count cash rebates from pharmaceutical companies toward their insurance plan deductibles — a policy that would help patients but hurt insurers.

AARP presents itself as a champion for older Americans, and in some respects, it has been. But as a major beneficiary of insurance industry profits, it’s hard to see how it can represent its members fairly. Today the organization is supporting policies that will lead to barer medicine cabinets tomorrow.