Report says generic drugs are a Wild West of pricing

Liz Seegert


pills-and-moneyNew research finds that changing retail prices for generic drugs could hit some consumers hard, while others may benefit from steep drops.  An joint analysis by AARP and the PRIME Institute at the University of Minnesota found that 11 widely used generic drugs had seen price increases greater than 30 percent, and two — both anti-infectives — had price increases exceeding 1,000 percent  in 2013.

At the same time, 203 of 280 drugs in the study’s “basket” of widely used generic prescription drugs by older Americans (including Medicare beneficiaries) experienced a price decrease, with some costs dropping by nearly one-third.

“There is no regulation of drug pricing,” Leigh Purvis, director of health services research at the AARP Public Policy Institute and the report’s co-author, said in a phone interview. “Companies are basically free to set whatever price the market will bear.”

One drug manufacturer, West-Ward, had an average annual price increase of more than 827 percent, more than 60 times higher than any other drug manufacturer with a weighted average annual price increase. The company, which did not respond to requests for comment on the analysis, makes a variety of generics in the 40 therapeutic categories studied.

Overall retail prices for most generic prescription drugs fell an average four percent in 2013, the smallest average annual decline since at least 2006. Purvis said this might signal that the era of falling prices for generic drugs may be ending.

The average annual cost of therapy for a generic drug within the market basket of drugs was $280 per year in 2013, the same as in 2012. Since almost two-thirds of older Americans take three or more prescription drugs regularly, their annual cost for these drugs would be about $850. Generics make up more than three-quarters of all retail prescriptions filled in the U.S., and have been linked consistently with a slowdown in prescription drug spending growth.

Purvis said industry consolidation, mergers, drug shortages and disruptions in the supply chain contributed to widely varying price differences. The drug industry is resisting efforts to reign in prices. Generic manufacturers have been reluctant to discuss their pricing strategies, even before Congress. “Our concern is that older consumers, who turned to generic drugs for cost-savings, will lose out,” Purvis said.

The report did note that generics still tend to be less expensive than their brand-name counterparts. Check out this ProPublica story about how a handful of doctors are wasting millions of Medicare dollars on brand-name prescriptions.

The report tracked generic drug prices at the retail level between 2006 and 2013. Sixty percent of the most widely used generics were on the market for the entire time. About 60 percent of those were used to treat chronic conditions like hypertension, diabetes, and chronic pain.

Retail prices for the study reflect the total price for a drug that a pharmacy benefits manager bills to a specific health plan, including Medicare and Medicaid, not only out-of-pocket costs, such as a co-pays, that a consumer might pay. Where consumers will be hit, according to Purvis, is in higher co-pays or premiums to account for the increased cost.

While most generic drug manufacturers decreased rather than increased prices for the 2013 market basket, the report noted that five manufacturers had “substantial” one-year generic retail price increases. Two forms of doxycycline jumped 1,961.5 percent and 1,748.1 percent respectively. Glipizide, a common diabetes drug, saw a more than a 52 percent hike.

The good news, according to the report, is that several drug prices dropped significantly in that time, including Vitamin D (76.8 percent), the blood pressure drug amlodipine besylate (36.3 percent), and warfarin, an anti-coagulant (32.7 percent). Purvis said some prices fluctuated based on geography, and standard market forces of supply and demand.

“Consumers should speak with their prescribers,” Purvis said. “Ask about low-cost alternatives. There might be another generic or another class of drug that will work.” This NCHS data brief looks at consumer strategies for reducing prescription costs.

Consumer advocacy groups are exploring various strategies, including reimportation, that might help to bring drug prices down, but right now “consumers are stuck,” she said. Most drug assistance programs are aimed at brand name drugs, not generics, so there’s little relief for a majority people that need these prescriptions.

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Liz Seegert

Liz Seegert

Liz Seegert is AHCJ’s health beat leader for aging. She’s an award-winning, independent health journalist based in New York’s Hudson Valley, who writes about caregiving, dementia, access to care, nursing homes and policy. As AHCJ’s health beat leader for aging,