Generic drug prices skyrocket, lack of alternatives lead to costly choices

Typically, providers and patients search for a generic equivalent of a drug to reduce costs. Yet generic drug prices are, in some cases, becoming cost prohibitive. Recently, the University of Utah Health Care system told US News it has removed a generic drug from its crash cart because of the price. Calls for investigation into the problem have been surfacing for years, and perhaps the public relations nightmare a company recently underwent after announcing a huge price hike will get the ball rolling.

High costs, higher stakes

Limiting access to these high cost drugs can lead to life-or-death decisions. Erin Fox, director of University of Utah’s drug information service, tracks drug shortages and found that isoproterenol hydrochloride (brand name Isuprel®) jumped to $2,700 a vial from its $50 price two years ago. Most of the network’s patients are covered by managed care plans, which do not pay enough to cover the $1.6 million needed to provide the drug. She notes that the hospital has managed even though critically ill heart patients would benefit from the drug, and that doctors still use it if a patient’s life is at stake.

Isuprel’s huge price hike caught the eye of the Heart Rhythm Society (HRS), which published a special notice in April 2015 about the price increase. The HRS noted that the price increase was due to changes in ownership. When Hospira owned the drug, the dosage price was $44.50. Marathon Pharmaceuticals bought the drug and increased the price to $218.30 per dose. In February 2015, Valeant Pharmaceuticals International, Inc. (Valeant) purchased the drug and increased the dosage to $1,200. Apparently, the price more than doubled by the time Fox was interviewed by US News. The HRS notice called for action, seeking help gathering information about Valeant’s price increase and advising members to collaborate with their local pharmacies in finding alternatives. It committed to working with the American Medical Association (AMA) to lobby for fair and accurate pricing.

Bad PR for drug companies

Although generic price hikes have been happening for some time, the media latched onto the story of Daraprim® several months ago. Turing Pharmaceuticals (Turing), a start-up company, acquired the rights to the drug, an antibiotic that treats a parasitic infection. The drug is many decades old, and cost $13.50 per tablet. Turing immediately jacked the price up to $750 a dose. This drug is vital for those who become infected with toxoplasmosis during pregnancy or for those with AIDS and certain cancers that suppress the body’s immune response. Martin Shkreli, Turing’s founder, said that the drug is rarely used and the company would use the money it collects to develop better toxoplasmosis treatments.

Despite Shkreli’s claims, the backlash was loud and fast. Some doctors stated that a new therapy option was not vital, and the switch from drugstores to controlled distribution made it harder for other companies to get enough samples to make their own copies. Like with Isuprel, some hospitals began questioning if it made fiscal sense to stock the drug, and others began reviewing every case. Express Scripts, a pharmacy benefit company, announced its decision to partner with Imprimis Pharmaceuticals to offer a compounded oral form of the primary ingredient in Diaprim for $1 per capsule. After the media hoopla, Shkreli decided to reduce Diaprim to a more affordable price.

Why generics?

Patients and insurers can breathe a sigh of relief when a drug patent runs out and the exclusivity period is exhausted, allowing new, cheaper generic options to flood the market. Pharmaceutical companies have long been known to do whatever they can to extend the life of their brand-name drugs. So why the price hike for generics? Forbes looked into the matter in February 2015, finding staggering numbers of generic drug use: nearly 80 percent of all prescriptions. These drugs are about 80 to 85 percent cheaper than brand name counterparts. In 2012 and 2013, $33 billion and $47.5 billions of sales value, respectively, lost their patents. Generics have saved the health care system over a trillion dollars since 2003, but 222 drug groups at least doubled in price between 2013 and 2014.

Forbes identified several sources of the problem. When the generic drug market was saturated in 2009, manufacturers began consolidating to achieve larger portions of the market. Fewer manufacturers producing each drug leads to less competition and less of an incentive to reduce prices. Then when one of these few manufacturers run low, rules of supply and demand cause the prices to rise. Some retailers have gone so far as to drop certain generics from their drug discount programs.