Generic drug price hikes cause hardships for pharmacies, patients

November 21, 2014

“We’ve got to get to the bottom of these enormous price increases," said Sen. Bernie Sanders (I-Vt.), chair of the Senate Subcommittee on Primary Health and Aging, during yesterday's hearing.

Pennsylvania pharmacist Robert Frankil testified Nov. 20 at a Senate subcommittee hearing that soaring prices for generic drugs were causing hardships for patients, payers, and community pharmacists.

Frankil, of Sellersville Pharmacy, Sellersville, Penn., appeared before the Senate Subcommittee on Primary Health and Aging to address the question “Why are some generic drugs skyrocketing in price?” He spoke on behalf of the National Community Pharmacists Association.

Related content: Lawmakers investigating soaring generic drug prices

Sen. Bernie Sanders (I-Vt.), chairman of the subcommittee, had invited three pharmaceutical company executives to testify as well. The CEOs of Marathon Pharmaceuticals, Lannett Co., and Teva Pharmaceuticals refused to testify.

However, others who were invited did testify, including Rep. Elijah Cummings, ranking member of the House Committee on Oversight and Government Reform, Washington, DC; Stephen Schondelmeyer, PharmD, PhD, of the University of Minnesota College of Pharmacy, Minneapolis, Minn.; Carol Ann Riha, West Des Moines, Iowa; Scott Gottlieb, MD, resident fellow of the American Enterprise Institute, Washington, DC; and Aaron S. Kesselheim, MD, JD, MPH, of Harvard Medical School, Boston, Mass.

Patients hurting

During his testimony, Frankil noted that uninsured patients and those with Medicare drug plans or high-deductible plans were being hit with costly increases for their generic medications. The price of digoxin at his pharmacy climbed from $15 to $120 for a 90-day supply - an 800% spike. One of his patients who had reached the Medicare coverage gap thought Frankil was overpricing the drug. However, as the patient soon discovered, that was the going price.

“Historically, generic drugs have provided significant cost savings to payers and consumers alike by providing safe and effective alternatives to typically more costly brand-name drugs,” Frankil said. “Therefore it was extremely concerning when, about a year ago, pharmacies began noticing a rash of dramatic price increases for many common, previously low-cost generic drugs.”

Pharmacies hurting

Pharmacies are also feeling the pressure from these skyrocketing generic drug prices. Pharmacy benefit managers (PBMs) are taking too long to update the pharmacy payment benchmarks for these unprecedented price spikes and are not reimbursing pharmacies retroactively, Frankil said.

“The current situation … is one that cannot be allowed to continue,” he said. “These prices are wreaking havoc on patients, pharmacists, and healthcare payers alike. In addition, the associated payment lags on these medications are jeopardizing the ability of small-business pharmacies to remain viable and continue to provide critical medications and related care to patients.”

Where do the profits go?

Sen. Sanders and Rep. Cummings had reached out to 14 generic drug manufacturers in early October, requesting documentation and information about escalating prices charged for specific generic drugs from 2012 to the present.

“It is unacceptable that Americans pay, by far, the highest prices in the world for prescription drugs. Generic drugs were meant to help make medications affordable for the millions of Americans who rely on prescriptions to manage their health needs,” Sanders said in a statement. “We’ve got to get to the bottom of these enormous price increases.”

Rep. Cummings testified that some drug manufacturers were taking advantage of their monopolies and disruptions in the supply chain to profit handsomely from the high-priced generic drug offerings.

“Corporate executives claim they are reinvesting 100% of these massive profits into production improvements and new medicines, yet they refused to provide any documents to support this dubious claim, and they declined to send anyone here to testify today,” he told the members of the subcommittee.

Schondelmeyer, who is a Drug Topics advisory board member, testified that the U.S. pharmaceutical market is the largest in the world, yet for a number of reasons Americans have to pay the most for their prescription drugs. PBMs who manage drug benefits for employers will often receive more revenue from drug manufacturer rebates and other payments than from the administrative fees charged to their clients - employers and health insurance plans. This structure “raises serious issues of fiduciary responsibility and conflict of interest,” he said.

Lack of transparency

In addition, although physicians and consumers may want to be more price-conscious when making decisions about a prescription drug, there is a problem with the transparency of the prescription as “the real net cost is not transparent and available,” Schondelmeyer said.

“It is unclear what factors are driving the price levels and the continued price increases of brand-name and generic prescription drugs,” he concluded. “Policy-makers interested in reducing the impact of brand-name and generic prescription drug prices should focus on options that balance the need for pharmaceutical innovation with the need for improved health and the financial security of consumers and taxpayer-funded programs like Medicare and Medicaid.”