Some generic drug prices soar despite heavy competition

pills and money

The furor over the dramatic increase in Mylan’s ($MYL) EpiPen price has many suggesting that what is needed to get drug prices under control is more competition from generics. The initial savings can be dramatic when generics first challenge a branded prescription drug. But the fact is, the prices of many established generic drugs, even those with multiple producers, have been rising significantly in recent years, with drugmakers taking price hikes nearly in lockstep.

Last week Chip Davis, CEO of the Generic Pharmaceutical Association, said that “increased competition from generic drugs is a proven way to ensure greater access while simultaneously keeping costs low for both patients and the overall healthcare system.”

But in a look at some older generic drugs, the Los Angeles Times found that many have seen huge price hikes on a percentage basis in recent years even when there are multiple producers of the drug. It found from Medicare data that 8 of the 10 drugs that had the biggest percentage price hikes in 2014 were generic medicines made by multiple manufacturers.

One example is ursodiol, a generic drug for gallstones produced by 8 drugmakers, including Mylan. Several years ago, the wholesale price ran as low as 45 cents a capsule. In May 2014, Lannett Co. ($LCI) bumped its price for ursodiol to $5.10 a capsule, a price hike of more than 1,000%. Rather than keeping their own generic versions of ursodiol low to steal market share, each competitor followed Lannett’s lead and priced their versions the same or close.

“Why are these companies raising their prices?” pharmacist Robert Frankil asked the LA Times rhetorically? “Because they can.”

The owner of Sellersville Pharmacy in Pennsylvania said the gallstone drug is one of dozens of generic drugs for which prices have spiked in the last couple of years, devastating the household budgets of  insured customers with high-deductible plans. “Patients paid $40 for their prescription one month and $400 the next,” he said. “Nobody can believe this is happening.”

Experts say the same scenario has played out time and time again with health insurers, federal health programs and consumers taking the financial hit. That is one factor that has led to prescription drugs costs now accounting for nearly 17% of personal healthcare expenditures, up from 7% in the 1990s, the LA Times reports, citing stats from Health and Human Services.

Even when Big Pharma player Sanofi ($SNY) challenged Mylan’s EpiPen monopoly with its own epinephrine injector in 2013, it brought Auvi-Q to the market priced at $241 for a package of two injectors. That was exactly the same price as Mylan’s EpiPen, the publication reports. Then instead of a price war for dominance, both kept raising prices until each was charging about $500 for two at the point in 2015 that Sanofi had to pull it from the market over problems with the injector giving inaccurate doses.

The Justice Department also has found some of the simultaneous price hikes suspicious. When the LA Times asked Lannett for a comment about its drug pricing, it said it couldn’t respond because of a federal inquiry. Mylan, Allergan ($AGN), which recently sold its generics unit to Teva ($TEVA), Par Pharmaceutical and Impax Laboratories ($IPXL) have all acknowledged receiving requests for info from federal investigators. Some have said they have been asked to provide any communications they have had with competitors over drug prices.

- read the LA Times story  

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