Generic Drug Price Inflation Affecting All Areas of the Health Marketplace

Generic drugs provide patients with access to a low-cost alternative treatment. A report by the IMS Institute for Health Informatics says that generic drugs account for 86 percent of drugs dispensed in the United States.

In recent years, generic drug price inflation has become an ongoing issue within the health care industry. As a result, generic drugs now make up 29 percent of pharmaceutical spending, according to the report from the IMS Institute for Health Informatics. In relation to the trend, official statistics from the Healthcare Supply Chain Association show how ten commonly-used drugs prices have increased at least 300 percent within six months.

Government officials have addressed the escalating drug price issue by illuminating the cost of widely prescribed drugs. According to an Oct. 2 press release, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Senator Bernard Sanders, Chairman of the Subcommittee on Primary Health and Aging, and member of the Committee on Health, Education, Labor and Pensions, sent inquiries to 14 drug markers for information behind the price increases. Later in the month, the two officials also wrote a separate letter to the director of the Department of Health and Human Services (HHS) asking both the government and the HHS to address the issue.

An Aug. 13, 2014 article from Drug Channels documents the effects generic drug price inflation has on the health care marketplace.

High prices are benefitting both generic and brand-name drug makers. Generic drug companies are seeing more profits stemming from the increased costs. Brand-name manufacturers are experiencing unexpected gains due to some medications costing less than generic drugs.

Drug inflation has both positive and negative effects on pharmacies. Revenue can grow due to higher profits per prescription, but those affiliated with third-party payers could experience lower reimbursements. Chains such as Walgreens have expressed their concerns about price inflation in recent financial reports.

Overall, consumers are seeing more out-of-pocket costs as prices continue to rise. Officials have noted the negative effects the expenses can cause. For example, research done by Michael Fischer, M.D., and colleagues at Harvard Medical School has linked increased out-of-pocket costs to primary medication non-adherence in patients.

Health officials are exploring potential solutions to these issues. One Health Affairs blog, co-authored by CVS Caremark officials William Shrank, M.D., Andrew Sussman, M.D., Troyen Brennan, M.D., and Patrick Gilligan, highlights the role pharmacies have in this effort. The authors also suggest ways pharmacies can encourage medication adherence to help lower expenses, such as offering incentives for cost-effective treatment and establishing patient intervention programs.

To accommodate generic drug inflation, Alliance of Community Health Plans members are compiling lists of preferred drugs and price tiers. Virgil Dickson of Modern Healthcare [subscriber’s content] writes how tiers help patients determine the cost of the generic drugs and the copayment rates.

HealthPartners of Minneapolis, Minn., currently has drug tiers for their Medicare Advantage plans and plan to implement them into their commercial and private plans. Their existing full drug formulary can be found on the health plan’s website.

Group Health Cooperative of South Central Wisconsin (GHC-SCW) previously used generics and brands when forming their drug tiers and has since shifted generics to different levels based on cost. Patients can view information about the tiers on GHC-SCW’s website.

Buffalo, N.Y.,-based Independent Health considers quality and medical effectiveness when developing their drug tiers. Officials explain that more effective drugs can help patients lead healthier lifestyles for lower costs. Their drug formularies featuring multiple tiers are available online.

Continuing action taken by all areas of the health care industry can address this ongoing issue.

– Betsy Pray, ACHP Intern


Leave a Reply

Your email address will not be published. Required fields are marked *