CBS Morning Rounds recently ran a piece on the soaring cost of certain generic drug prices (see the clip here). Despite the potential divisiveness of the topic, the piece was very balanced as Dr. Jon LaPook and Dr. Holly Phillips did a very nice job in describing the issues. The low price of generic products is universally saved American consumers $239 billion last year, although an estimated 9.4% of generic drugs doubled their price last year.
The CBS piece cites potential reasons certain price increases have occurred as a decrease in the amount of competition for a particular drug product, temporary exit from the product market due to manufacturing problems, or decreases in the supply of active ingredients. There is no question that the reason generic drug prices are generally low is that there are multiple approvals for a specific drug. Typically, as the number of entrants into the market for a specific drug increases, the price decreases. Also, an interesting phenomenon is that sometimes when the number of approvals is large (say, 10-12) for a particular drug and the prices drops so significantly as a result, the product does not remain profitable for all of the manufacturers and, slowly, some of the players drop that drug from their product line in favor of other more profitable drugs. As the number of suppliers of a specific drug decreases, the price begins to creep up. While some of the price increases are alarming to patients and healthcare providers, the overall price benefit of generic drugs cannot be overemphasized.
Is there another factor in increasing drugs costs? Well, one other possibility is the slowdown in the rate of generic drug approvals. The Office of Generic Drugs (OGD) has identified first time generic drug approvals and drugs that represent a shortage as examples of products for which priority review will occur based on public health policy. But what about drugs for which the number of entrants decreases? Remember that FDA is not supposed to concern itself with the cost of drug pricing, but one must also remember the basic tenants of the Hatch-Waxman Act is to make high quality, low cost generic drugs available in an effort to reduce associated healthcare costs.
With the frequency of stories of generic drug price hikes increasing and Congressional interest being paid to this topic increasing, what can the industry and the public expect the outcome to be? Perhaps once the backlogs at FDA are under control and the number of approvals increase, this issue will begin to fade from the limelight, but in the interim, what’s a mother to do when she can no longer afford her medication? Should the FDA also be looking at increasing the number of ANDA approvals for specific drug products when the number of manufacturers decreases like they do when there is a drug shortage? This, in my opinion, would place a tough new burden on an already overburdened system. There is clearly no easy answer.