'Extraordinary' generics price hikes hit Medicare Part D amid big reduction overall

Generic drug prices in Medicare Part D decreased significantly in recent years, a new report from the U.S. Government Accountability Office (GAO) says. So why the worry about price hikes? Hundreds of products saw “extraordinary price increases," that's why.

For a group of 2,378 generic drugs--including those that entered or exited the market from 2010 to 2015--Medicare Part D prices fell overall by 59%.

But “established generics"--the 1,441 drugs that stayed on the market the entire time--fell by just 22%. More than 300 cases of “extraordinary price increases” kept prices from falling further, the GAO said.

Those extraordinary hikes amounted to at least 100%--and in those cases, the prices rarely dropped afterward, the agency said.

'Established' drug prices fell less

The findings are in line with a recent Los Angeles Times investigation that showed some generic drugmakers followed competitors’ price increases by jacking up the stickers on their own meds. For example, ursodiol, a generic gallstone drug made by 8 companies that had cost 45 cents a capsule: In May 2014, Lannett raised the price by more than 1,000% to $5.10 each, and competitors soon followed with similar pricing.

That’s exactly the kind of maneuver Democratic presidential candidate Hillary Clinton is targeting with her new plan, unveiled earlier this month as part of a larger effort to tackle healthcare costs. She proposed a panel that would look for “excessive, outlier” price hikes. Then, enforcement actions could include fines and other measures to increase competition.

That panel would not pass muster with lawmakers, however, according to Evercore ISI policy analyst Terry Haines. Shortly after the announcement, Haines said a “‘citizen panel’ is not something that would survive a bipartisan legislative process.” Pfizer CEO Ian Read chimed in, saying that overall, the proposals are “very negative for innovation.”

Worth noting is that the GAO data end in the second quarter of 2015, and “most investors understand that generic pricing has seen a meaningful change coming into 2016,” Evercore ISI analysts pointed out.

Even still, the Generic Pharmaceutical Association is praising the newest GAO report. “At a time when everyone is looking for cost saving solutions, it is important to note that the GAO findings are consistent with the prevailing market trend--generic drug prices overall continue to decline year over year,” GPhA CEO Chip Davis said in a statement.

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