Generic Drug Prices Rising: What is the solution?

By: Jon Alpern, M.D. and Bill Stauffer, M.D., M.S.P.H.

US spending on prescription drugs continues to be a significant component of healthcare spending. According to IMS data, $373.9 billion was spent in 2014, which was a 13.1% increase.1 Brand name specialty drugs account for much of this. The introduction of generic versions into the market should allow for significant cost savings to payers, however recently some generic drugs have skyrocketed in price.This has left patients relying on these medications vulnerable.In our article: http://www.nejm.org/doi/full/10.1056/NEJMp1408376 – t=article we describe how decreased competition within the generic market can lead to high prices, and highlight the case of albendazole as an example of exploitative pricing in circumstances where a natural monopoly has formed.2

As we examine solutions to the problem of high generic drug costs, more research is needed to determine where price hikes are occurring and the extent of the problem. Importantly, this issue has garnered attention by lawmakers, and a congressional hearing was held in November, 2014.3 A bill was introduced by Senator Sanders proposing that generic drug manufacturers pay a rebate to Medicaid when the price of a generic drug increases beyond inflation.4 By request of Senators Cummings and Sanders, the Department of Health and Human Services Inspector General will also be investigating the extent of the problem further.5

Perhaps of greatest interest to providers, and what should have important policy implications, is the effect that rising generic drug costs is having on decision-making at the patient and provider level. When the cost of a medication suddenly increases, how are patients and providers responding? Are they attempting to acquire their medications from foreign sources either through importing or via internet/mail? Are they not filling their prescription at all? We believe the answers to some these questions may be sobering but will help determine the true scope of the problem and the appropriate policy solutions.

References:

  1. Medicines Use and Spending Shifts: A Review of the Use of Medicines in the U.S. in 2014. Imshealth. Available at: http://www.imshealth.com/portal/site/imshealth/menuitem.762a961826aad98f53c753c71ad8c22a/?vgnextoid=3f140a4331e8c410VgnVCM1000000e2e2ca2RCRD&vgnextchannel=736de5fda6370410VgnVCM10000076192ca2RCRD&vgnextfmt=default
  2. Alpern, JD, WM Stauffer, and AS Kesselheim. “High-cost generic drugs–implications for patients and policymakers.” The New England journal of medicine 371.20 (2014):1859-62.
  3. “Why are Generic Drugs Skyrocketing in Price?” Subcommittee on Primary Health and Aging. Thursday, November 20, 2014. Available at: http://www.help.senate.gov/hearings/why-are-some-generic-drugs-skyrocketing-in-priced
  4. http://www.sanders.senate.gov/download/051815letter/?inline=file
  5. http://www.sanders.senate.gov/download/oig-letter-to-sen-sanders-4-13-2015?inline=file

Jon Alpern was recently featured on ABC’s nightline story: http://abcnews.go.com/video/embed?id=31382867 ABC US News | World News

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