Rx trends 2015: Rising generic drug prices

NEW YORK — Generic drug prices are going up. Spurred by market opportunities, short-term market exclusivity for some newly launched single-source generics and rising costs for manufacturing, quality control and raw materials, me-too drug manufacturers have escalated a series of price hikes, some of them significant.

 

With copycat medicines now comprising roughly 85% of all prescriptions dispensed in the United States, the impact is significant. “We’re back to double-digit growth that we haven’t seen in 10 years … because of specialty drugs and price inflation,” said Doug Long, VP industry relations for IMS Health. “There’s a lot of generic price inflation; it’s the No. 1 issue on the minds of many payers.”

 

For pharmacy retailers, the price inflation is a double-edged sword, offering higher top-line growth but potential snags both in bottom-line profitability and consumer and plan payer resistance. In a report on its 2014 fiscal results, Walgreens Boots Alliance acknowledged the challenge.

 

“Overall increases in the amounts we pay to procure generic drugs … could have a significant adverse effect on our profitability,” the company reported. “In addition, our gross profit margins would be adversely affected by continued generic inflation to the extent we are not able to offset such cost increases.

 

“We expect this generic inflation to continue in fiscal 2015,” Walgreens added. “Our existing reimbursement arrangements with payers generally provide us with only limited protection against cost increases in our generic drug procurement costs. We are seeking to address this through changes in our contracting strategies and negotiations with our vendors and payers.”