While the economy plunged in 2008, older Americans saw prices soar for their most popular brand-name prescription drugs, with costs climbing an average of almost 9 percent—the biggest annual increase in the last six years, according to an AARP report.

The increase was more than twice the general inflation rate of 3.8 percent, and trumped even previous annual drug price increases, which ranged from 5.3 to 7.4 percent.

The Rx Watchdog Report by AARP’s Public Policy Institute, released Thursday, tracked manufacturer prices for the brand-name, specialty and generic prescription drugs most widely used by Medicare beneficiaries in 2008.

In just one year, older Americans routinely taking three brand-name drugs saw their drug bills jump by an average of $550.

“In a time of economic distress, it’s outrageous that Medicare beneficiaries face such rapidly rising prices for the medicines they need to stay healthy,” says John Rother, AARP’s director of public policy.

Even as generic prices declined, five widely used brand-name medicines had price increases last year of more than 20 percent, including Prevacid, a medicine for ulcers and acid reflux, up 30.5 percent; Wellbutrin, an antidepressant, up 21 percent; and Lunesta, a sleep medication, up 20.3 percent. The price of the brand-name antidepressant Zoloft, meanwhile, rose by 12.3 percent while the cost of sertraline, the generic equivalent, dropped by 45 percent.

Why the big hikes for brand-name medicines? Drug companies have major products facing generic competition and most don’t have many major new blockbusters coming onto the market, “so they are trying to get the most for the drugs they have,” says Stephen W. Schondelmeyer, a coauthor of the study and a professor of pharmaceutical economics at the University of Minnesota.

The Pharmaceutical Research and Manufacturers of America, an industry group, took issue with the AARP report. Senior Vice President Ken Johnson said in a statement that IMS Health, which provides market information to the drug industry, reports “that prescription drug costs in 2008 grew by 1.3 percent, the lowest rate of growth in 47 years.”

However, according to Leigh Purvis, an author of the AARP report, the 1.3 percent figure cited by PhARMA is for sales, not prices. Reduced sales growth in 2008, she said, was the result of less expensive generic drugs, lower new product sales and reduced consumer demand because of the economic crisis.

Along with brand-name drugs, the price of specialty drugs used to treat complex or chronic illnesses such as cancer, multiple sclerosis and rheumatoid arthritis also jumped, by an average of 9.3 percent. These drugs—primarily biologics derived from natural sources like protein molecules—often command prices that are 10 to 100 times greater than other prescription drugs because patients have no or few alternatives and there are usually no competing medicines. Specialty drugs carry prices that can reach hundreds of thousands of dollars a year.

For a consumer who takes a specialty drug for a chronic condition like MS, the average cost of that therapy rose more than $9,250 from 2004 to 2008, the report states.

Specialty drugs are expected to be the fastest growing group of medications in the decade ahead.

While brand-name and specialty drug prices were climbing, the prices of generic drugs, which account for almost two-thirds of all retail prescriptions in the United States, decreased dramatically, dropping an average of 10.6 percent. Most generic drug prices stayed the same, despite inflation, but when prices changed, the reductions were as much as 45 percent.

But even the 10.6 percent decrease in the price of generics was not enough to offset the increases for the two other types of medicines. When the average prices for all three types of drugs were combined, consumers saw an average hike of 4.5 percent in prescription drug prices last year .

The study tracks the prices drug manufacturers charge wholesalers and other direct purchasers for widely used prescription drugs, and those prices play a key role in the health care system, experts say. The cumulative effect of these yearly increases is striking: In the last seven years, average manufacturer prices for the 168 most widely used prescription drugs on the market increased by almost 64 percent from 2002 to 2008, the report says. During that period the rate of inflation was 19.2 percent.

The report also found that manufacturer prices have been even steeper for brand-name and specialty prescription medicines since the implementation of the Medicare prescription drug benefit in 2006.

Over the first two years of the Part D drug benefit, prices for the 144 specialty drugs most widely used by beneficiaries rose by almost 8 percent in 2006 and by 8.7 percent in 2007. In the two years before the benefit, the annual price hikes were 5 percent and almost 7 percent.

Experts say that rising drug prices threaten Medicare beneficiaries by increasing the out-of-pocket spending for those who pay a percentage of their drug costs under a coinsurance plan. The price hikes also push beneficiaries into the “doughnut hole” coverage gap, when individuals are responsible for paying all their drug costs up to a capped amount.

Barbara Basler is a senior editor with the AARP Bulletin.