Generic drugs are not immune to price increases, and the problem is worsening.
Prices for these drugs fell 59% from the first quarter of 2010 through the second quarter of 2015, but prices for more than 20% of generic drugs increased more than 100% in the same time period, according to the Government Accountability Office (GAO).
The GAO considers lack of competition to be the primary driver of generic drug price increases. And in fact, the FDA reports that more than half of its approved generics are not being sold and another 14% are of “unknown marketing status.”
But experts say rising prices also can be attributed to pricing abuses, such as extending patents and exclusivity by branded drug manufacturers, and insufficient action by the FDA and government to ensure generic drugs are reviewed and approved for entry into the market.
The problem boils down to market dynamics, says Ken Majkowski, PharmD, chief pharmacy officer of FamilyWize, a community-based organization that offers a free prescriptions savings program. “Prices go up because pharmaceutical companies feel they can charge more and thus make more. They go down if there is increasing competition or threat of government intervention,” he says.
That is only the short list of challenges. Adding to the fray, are:
- Shortages of raw materials.
- Patent extensions by slightly tweaking products.
- Expenses associated with entering the marketplace.
- Backlogs of Abbreviated New Drug Applications (ANDAs).
- More brand drug manufacturers paying generic companies not to launch drugs, a tactic which the Federal Trade Commission estimates costs U.S. consumers and taxpayers $3.5 billion in higher drug costs annually.
- Circumstances in which the same product is sold under a generic name by the manufacturer of the branded product, enabling 180 days of exclusivity awarded to the first producer of a generic.
- Little incentive from PBMs to encourage drug manufacturers to lower prices because profits increase as drug prices do.
Erin Fox, senior director of drug information, University of Utah Health, also points to excessive price hikes, as was the case with Daraprim (pyrimethamine), when Turing CEO Martin Shkreli hiked up the price overnight from $13.50 to $750 a tablet—a 4,000% increase for a drug first approved in 1953.
She also is concerned about the unintended consequences of the FDA’s 2006 Unapproved Drugs Initiative, which removed unapproved drugs from the market. For example, intravenous vasopressin for hypotension received FDA approval in November 2014 under the name of Vasostrict (vasopressin Injection). After being marketed for nearly a century without FDA approval, no other manufacturers were allowed to produce the drug. Its price soared to $138.40 per vial from it original cost of $4.27, a 3,141% increase, says Fox.