Experts say a combination of lack of government oversight over generic pricing, manufacturers exiting the generic market—some because of quality citations from the Food and Drug Administration and some because of claimed insufficient profits—and shortages of active ingredient have contributed to the sharp price increases.
The generic price hikes are adding to growing concerns about the cost of prescription drugs, which has become a big issue since Gilead Science's introduction of $1,000 per pill Sovaldi to treat hepatitis C. And moves by insurers to control the cost of generics could lead to confusion among consumers—who increasingly have been trained to choose generics—about how and whether generics are different from brand-name drugs.
Concerns over generic drug prices have reached Capitol Hill. Earlier this month, Rep. Elijah Cummings (D-Md.) and Sen. Bernard Sanders (I-Vt) sent letters to 14 drugmakers that make or distribute generic drugs, requesting explanations for price increases. Hearings could result from the inquiries depending on the responses, which are due by Oct. 23.
For many health plans, the solution to the rising cost of generics has been to create tiers and preferred lists, requiring members to pay higher copayments for drugs that are not on low-tier or preferred lists. This may mean a jump in the copay from $5 to $20.
Some experts say any increase in cost sharing can be too much for patients of modest incomes who may simply stop getting their prescriptions filled or take less of the medication than is prescribed by their doctors.
But Daniel Foss, a spokesman for the 630,000-member HealthPartners Plans, said pricing tiers “help encourage members to ask if there is a lower-cost generic available that may work for them. His company previously had tiered generic lists for its Medicare Advantage plans. It intends to introduce tiered generic lists in its commercial and exchange plans starting in January.
Other insurers have revised their definition of tiers that already are in place for brand-name drugs. For instance, the 80,000-member Group Health Cooperative of South Central Wisconsin no longer defines tiers in terms of generics and brands. While most generics remain in tier 1, the lowest tier, the plan has moved more expensive generics up to tier 2. Meanwhile, it has shifted some preferred brand-name drugs down to tier 1. “Now, instead of worrying about the definition of category, costs are more directly tied to the cost of the drug itself,” said Jeanan Yasiri Moe, chief planning and innovation officer for the plan.
Independent Health, a New York insurer with 400,000 members, says it considers quality and clinical effectiveness over price when developing its preferred drug list, said Marty Burruano, vice president of pharmacy. That's because products that help members stay healthy will lead to lower costs. And if higher costs discourage members from using an effective drug, that also leads to poorer health and higher costs for the insurer, he added.
Gerry Oster, a vice president at the consulting firm Policy Analysis who wrote an article about rising generic prices published last month in the American Journal of Managed Care, said he has no problem with plans switching to tiers for generics to discourage use of products that are not as effective. What troubles him are the cases where there are no other pharmaceutical options on a plan's preferred list for certain ailments and where the higher-cost generic has been shown to be the best option. “Some of these drugs are lifesaving, and you just have to ask yourself what are these plans thinking?” he said.
Other insurers say they are finding alternative ways to deal with the rising cost of generics. For instance, HealthSpan, which has 100,000 members in Ohio, Indiana and Kentucky, is launching an initiative known as a Health Savings Medication list, which will cap copays for generics at $4, $6 or $8 starting in January. “The two main functions are to help our members save money and help improve adherence by ensuring that members can afford their medications,” said Laura Dunn, a plan spokeswoman.
Still others say they are not doing anything special related to the rising cost of generic drugs. “Even while the costs of generics rise, they remain more cost-effective than brand-name drugs,” said Mary Beth Chambers, a spokeswoman for Blue Cross and Blue Shield of Kansas. “We are not currently planning to tier generic drugs or prefer a brand name over a generic. Our primary focus continues to be balancing the costs of high-dollar specialty drugs and brand names, and their impact on premiums, with the medical needs of our members.”
In a written statement, the Generic Pharmaceutical Association said, “The generic industry is unrivaled in its commitment to access to lower-cost drugs for patients... (and it) will continue to play a central role in generating much needed health cost savings and remains firmly committed to delivering safe, more affordable generic medicines to patients who need them.”
Sanders said in a written statement that “generic drugs were meant to help make medications affordable for the millions of Americans who rely on prescriptions to manage their health needs. We've got to get to the bottom of these enormous price increases.”
The companies that were sent letters by the congressional panels requesting information about generic price increases included Actavis, Dr. Reddy's Laboratories, Endo International, Mylan Laboratories, Heritage Pharmaceuticals, Sun Pharmaceutical and Teva Pharmaceuticals.