By ELISABETH ROSENTHAL OCT. 7, 2014
The prices of some generic drugs have soared more than 1,000 percent in the last year, and federal officials are demanding that generic drug makers explain the reasons for the increases or potentially face new regulation.
The increased use of generic drugs has been one of the rare success stories in national efforts to curb the nation’s $2.8 trillion medical bill, since generics have historically been far cheaper than name-brand versions. More than eight in 10 prescriptions are filled with generic drugs, according to the Food and Drug Administration. In the 10-year period from the beginning of 2003 through 2012, generic drug use has generated more than $1.2 trillion in savings, according to the Generic Pharmaceutical Association.
But prices of some generic drugs have risen sharply recently, prompting the new congressional investigation, led by Representative Elijah E. Cummings, the ranking member of the House Committee on Oversight and Government Reform, and Senator Bernard Sanders, chairman of the Senate Subcommittee on Primary Health and Aging.
They said they undertook the investigation because of recent complaints from constituents, pharmacists and in the media. They are focusing on 10 drugs whose large price increases came to their attention.
“Generic drugs were meant to help make medications affordable for the millions of Americans who rely on prescriptions to manage their health needs,” Senator Sanders said in a statement. “We’ve got to get to the bottom of these enormous price increases.”
Some of the rises have been huge, according to data released by the lawmakers. The price that hospitals and pharmacies pay for a bottle of 500 tablets of doxycycline, a decades-old antibiotic, rose to $1,849 in April, from $20 in October 2013. The price they pay for a bottle of pravastatin, a drug to lower cholesterol, rose to $196 from $27 in that same time. The price of a pill of digoxin, a centuries-old medicine that is irreplaceable for some cardiac patients, rose to $1.10 this summer from 11 cents in 2012.
Some or all of such price increases are passed on to patients.
Late last week, the lawmakers sent letters to 14 drug makers that make or distribute the 10 generic drugs, requesting explanations for price increases. They may hold hearings depending on the response, which is due by Oct. 23. Some manufacturers have already promised cooperation.
“The first thing we need to understand is why these drug companies are raising their prices so dramatically in such a short period of time, which is why we asked for information about the costs to produce these drugs compared to the prices they are now charging,” Representative Cummings said this week. “Once we receive that information, we will be in a better position to evaluate the root causes of these massive increases and, if necessary, consider reforms.”
In a statement, Ralph G. Neas, president and chief executive of the Generic Pharmaceutical Association, said that facts about generic drug prices had been “mischaracterized,” focusing on a handful of drugs with big price increases, among the thousands of “safe, affordable” generic medicines.
Generic drug prices are generally lower than brand-name drugs because manufacturers are competing to sell medicines that are essentially interchangeable. But studies have shown that for competition to bring price down significantly, four or five companies usually need to be making a drug.
Drug prices can rise for several reasons related to normal shifts in supply. Companies can leave the market, resulting in decreased supply and less competition. A factory producing the drug may be temporarily closed for violations. But there has been increasing concern that, in some cases, prices rise because of questionable business practices or market manipulation. In the last several years, the Federal Trade Commission and state attorneys general have taken aim at a practice called “pay for delay,” in which brand manufacturers pay generic drug makers to hold off entering the market.
This summer, after a New York Times article about increases in the price of generic digoxin, the Connecticut attorney general issued a subpoena to Lannett, a Philadelphia-based company that is a major distributor of the drug, to assess whether it was engaging in “fixing, maintaining or controlling prices of digoxin” in violation of antitrust law.
In September, the company said its internal review concluded that it had “acted in compliance with applicable laws and regulations with regard to the pricing.”
The attorney general’s office said the investigation was continuing.