Price hikes, restrictions threaten generics’ status

Once viewed as the best 35 bargain in the healthcare system, generic drugs may be on the verge of losing that status.

Rapidly rising prices for many generics, regulations that could restrict patients’ access to these medications, a Food and Drug Administration backlog in getting new drugs approved and market consolidation that is reducing competition are all making some wonder how much longer generics will continue to be affordable.

(Click here to view the full Category Review.)



“Compared to the funds spent on doctors and hospitals, prescription drug therapy is 0cheap,” National Center for Policy Analysis senior fellow Devon Herrick wrote in a report issued in October that examines why generics prices have continued to skyrocket over the past few years. “However, the prices of many generic drugs have increased significantly recently — often for no apparent reason.”



According to IMS Health, generics account for 88% of all prescriptions filled in the United States, but make up only 28% of the nation’s drug spending. The report noted that spending on generics increased 5.3% over the past year, and the total number of prescriptions filled with generics went up 3.2%.



Proponents of these medications argued that while some generics have seen sharp price increases, the drugs continue to be at the heart of the nation’s effort to rein in healthcare spending.



“Generic medicines are a critical part of systemwide efforts to hold down healthcare costs,” Generic Pharmaceutical Association president and CEO Chip Davis said in the wake of public outcry after drug maker Turing Pharmaceuticals raised the price of its Daraprim (pyrimethamine), a drug that is used by only about 2,000 people worldwide, by 5,000% in a single day.



The price hike — which saw the price of Daraprim go from $13.50 a tablet to $750 per pill — is indicative of what NCPA’s Herrick and others see as a result of the FDA being overwhelmed with new drug applications. Currently, he said, the agency has a backlog of 4,000 generic drug applications.



Too often, Herrick noted, the slow process of getting a new generic approved results in one company being the sole supplier of that drug, creating a de facto monopoly and leaving the company free to charge whatever it wants for its medication.



Critics of the FDA said that another of the agency’s policies also is contributing to the recent price hikes.



Many of the thousands of generic drugs that predate the FDA’s approval process required under the 1938 Food, Drug and Cosmetics Act were grandfathered but never officially approved, they noted. The agency is asking that these drugs now undergo the same rigorous clinical studies as newer medications.



Companies that do the tests will receive licenses that can temporarily give them monopoly-pricing power as most rivals are eased or kicked off the market.



“The process of forcing old generic drugs off the market invariably results in higher prices for the newly approved versions compared with their generic versions — something the FDA acknowledges,” Herrick said in his report.



Meanwhile, raw material shortages and production problems that have caused some suppliers’ facilities to fall out of compliance with good manufacturing practices have led to drug shortages and driven up prices on some generics. For instance, in 2013 a shortage of the raw materials used to make the antibiotic doxycycline led some manufacturers to stop producing it. With fewer suppliers offering the product, the cost of doxycycline has soared during the past two years.



The dramatic rise in generics prices has caught the attention of federal regulators and members of Congress. Sen. Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.) held hearings last fall on generic price increases. At those hearings, the lawmakers cited doxycycline as a prime example of the price inflation that is impacting generic drug costs. In the six months between October 2013 and April 2014, they said, the price of a bottle of doxycycline went from $20 to $1,849.



Meanwhile, a federal grand jury in Philadelphia has reportedly begun looking into what is driving the rapid escalation in the price of generics. According to the Philadelphia Inquirer, two generic drugmakers — Lannett and Allergan (formerly Actavis) — have acknowledged receiving subpoenas to testify before the panel.