Effort to Curb Rising Generic Drug Costs Reaches Congress

JULY 20, 2015
Allison Gilchrist, Associate Editor
Legislation has been introduced in Congress to rein in skyrocketing generic drug prices. Sen. Bernie Sanders (I-VT) and Rep. Elijah Cummings (D-MD) introduced the Medicaid Generic Drug Price Fairness Act in the Senate and House, respectively. This proposed legislation would require drug manufacturers to pay a rebate to Medicaid when their generic prices increase at a rate that outpaces inflation.

“For years, generic drugs have made it possible for people to buy the medicine they need at lower prices,” Sanders said in a press release. “We need to make certain that generics remain affordable.”

Nearly 10% of generic drugs more than doubled in price between July 2013 and July 2014 alone, according to data from the US Centers for Medicare and Medicaid Services. In the same time period, the price of more than 1200 generic drugs increased by an average of 448%.

Cummings said the federal bill serves as a response to concerns raised by physicians, hospitals, pharmacies, and patients about drug manufacturers increasing generic drugs prices without an explanation. In a survey conducted by the National Community Pharmacists Association (NCPA), 87% of pharmacists said it took at least 1 month for reimbursement rates to adjust in accordance with an increased generic drug acquisition cost.

“For decades, community pharmacists have promoted the appropriate use of generic drugs to lower costs. However, more recently, the price for some of these medications has skyrocketed 1000% or more virtually overnight, while reimbursement rates paid to community pharmacists have inexcusably lagged behind for weeks or months,” stated NCPA CEO B. Douglas Hoey, RPh, MBA.

The idea of shielding both pharmacies and patients from lagging medication reimbursement rates and unchecked costs is not unprecedented in US health policy, the lawmakers noted.

“Our bill will extend the same price protections that already apply to brand-name drugs to generic drugs purchased under Medicaid,” Cummings said. “And it will save $1 billion in taxpayer funds in the process.”

Beyond the bill, the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) is investigating the rising prices of generics. The OIG review consists of examining quarterly average manufacturer prices (AMPs) “for the top 200 generic drugs, as ranked by Medicaid reimbursement, for each year from 2005 through 2014 [to] determine the extent to which the quarterly AMPs exceeded the specific inflation factor,” wrote HHS Inspector General Dan Levinson in separate letters to Sanders and Cummings in April.

“We will also determine the amount of additional rebates that the Medicaid program would have received if the specific statutory inflation factor had been applied to generic drugs,” Levinson wrote.

Ralph G. Neas, president and CEO of the Generic Pharmaceutical Association, denies that price increases are a problem. In a statement, he contended that the recent federal efforts “reflects a basic misunderstanding of the pharmaceutical marketplace…This effort is misguided and will threaten patient access to affordable medicine.”