Escalating prices of generic drugs targeted by US anti-gouging legislation

Submitted: 29 January 2019; Revised: 4 February 2019; Accepted: 5 February 2019; Published online first: 14 February 2019

Generic prescription drug prices have been escalating rapidly in the US. In 2014 alone, generic drug prices increased by 38% on average. Public outcry has led to a flurry of recent legislative proposals, and two federal bills were introduced in 2017 to improve price transparency and identify drugs exhibiting outlier ‘price spikes’, however, both remain unenacted. The states have been more successful in their efforts to control drug price increases; in the first three months of 2018, 53 drug pricing transparency bills were initiated in 23 state legislatures.

Conti and colleagues set out to examine annual generic prescription price levels and inflation-adjusted price changes in the US between 2013 and 2014 [1]. They identified drugs with annual price increases in excess of the growth in the medical consumer price index (CPI), and in excess of 15% or 20% as per outlier penalty thresholds proposed by legislation. They also assessed which drug characteristics were associated with meeting these outlier thresholds using logistic regression models. The leading source of national data on price, use and sales of prescription pharmaceuticals, IQVIA Health Incorporated’s National Sales Perspectives, was used to assess all generic prescription products available in the US during this period. The sample included oral, infused, injected or otherwise formulated generic drugs dispensed through all channels and covered by insurer pharmacy and medical benefits, amounting to over 1.5 billion annual wholesale transactions.

In total, 6,182 generic drug products supplied by 378 manufacturers were included in the sample. Approximately 50% of these products experienced price increases in excess of the growth in the medical CPI, while 28% of products exceeded the 15% price increase threshold and 23% of products exceeded the 20% price increase threshold. The mean inflation-adjusted price increases for products exceeding the medical CPI, 15% and 20% thresholds were 93%, 162% and 191%, respectively, see Table 1.

Table 1

Injectable products were by far the most expensive per unit while orals were the least expensive (mean price US$133.76 versus US$2.63, respectively). Branded generic drug products made up 21% of all generics and had prices over 13 times higher than unbranded generics. Approximately 10% of products sold fewer than 1,000 units in the quarter preceding the price change measurement, and these products had prices over eight times higher than other products. Approximately 8% of all products had an orphan drug designation, and these had prices over 15 times higher than non-orphan products. While most (79%) products had sales of less than US$100 million, 1% of products had sales in excess of US$1 billion.

Results of the logistic regression revealed that drugs exceeding outlier thresholds had lower baseline price levels than the mean price level of all generic drugs. The number of manufacturers was associated with higher price increases, and the characteristic that most consistently predicted whether a product would exceed an outlier penalty threshold was being supplied by a single manufacturer. Indeed, the data show that average prices were over 35 times higher for products supplied by a single manufacturer than those supplied by five or more manufacturers. The authors believe this suggests that limited supply and/or inelastic demand may be a factor in driving individual manufacturers to increase prices, and recommend further studies to examine whether decreases in generics competition can explain these dramatic price increases.

Pharmaceutical policy in the US aims to strike a balance between providing adequate returns on investment to manufacturers while ensuring affordability of drugs. The results of the present study reveal that 13% of gene-ric drugs had price increases of greater than 20% between 2013 and 2014, demonstrating that a higher proportion of generic drugs experienced ‘price spikes’ than suggested by media and legislative hearings. Rising drug prices indicate that current policies need to be revisited, and unintended consequences of policies need to be carefully assessed, for example, the use of thresholds to defi ne outlier price increases might in practice lead to more widespread price increases among generic drugs.

Competing interests: Research of the paper [1] was funded by the Commonwealth Fund and the American Cancer Society.

Provenance and peer review: Article abstracted based on published scientific or research papers recommended by members of the Editorial Board; internally peer reviewed.

Sophie Shina, MSc, GaBI Journal Editor

1. Conti RM, Nguyen KH, Rosenthal MB. Generic prescription drug price increases: which products will be affected by proposed anti-gouging legislation? J Pharm Policy Pract. 2018;11:29. doi:10.1186/s40545-018-0156-8

Disclosure of Conflict of Interest Statement is available upon request.

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