The Alarming Side Effects of Rising Generic Drug Prices

By Martin Burruano

Turing Pharmaceuticals’ outrageous cost increase from $13.50 to $750 a pill for a long-standard medicine to treat parasitic infections is just the latest example of an alarming upward trend in the price of prescription drugs. The capricious price increase of drugs – from generics to specialty medications – presents a significant challenge to addressing the unsustainable trend of rising health care costs.

The Centers for Medicare and Medicaid Services projects U.S. health care spending reached $3.1 trillion, or $9,695 per person, in 2014, a 5.5 percent increase over the previous year. Prescription drug spending jumped nearly 13 percent to $374 billion, the largest increase in more than a decade.

Generic drugs, traditionally a vital cost saver for consumers, account for about 80 percent of all prescriptions nationally and 85 percent at Independent Health. Therefore, they play a pivotal role in controlling costs, saving the U.S. health care system nearly $1.5 trillion between 2004 and 2013.

For various reasons, generic drug prices have soared in recent years. Consumers paid an average of $13.14 per prescription for the 50 most popular generic drugs in 2010. In 2014, they paid $62.10, a 373 percent increase.

To counteract this alarming trend, health plans and national pharmacy benefit managers have been forced to adjust the drug formularies that determine which prescriptions are covered, and at which co-payment level.

Moving certain high-cost drugs to higher co-payment tiers or removing them altogether when another higher value drug is available can help reduce demand for over-priced medications and hopefully force drug manufacturers to lower costs.

While formularies and other tools can help balance demand for high-cost generics, requiring increased transparency in how drug manufacturers price their products would help explain the mystery of seemingly arbitrary price hikes. Price transparency standards would also place much-needed pressure on pharmaceutical companies to maintain fair prices.

The surge in generic drug prices has drawn ire in Congress, which held a hearing on the matter late last year. New York State legislators have also begun to seek legislative solutions. A Senate bill would require manufacturers to submit a report disclosing total costs of the production of certain expensive drugs, with the information to be published on a public website.

Every stakeholder – from employers and municipalities to patients and providers – suffers the consequences of arbitrary price hikes. Greater transparency will go a long way in preventing random spikes in traditionally affordable generic medications as well as outrageously priced new drugs.


Martin Burruano is a registered pharmacist and vice president of pharmacy at Independent Health. This piece originally appeared in The Buffalo News. To learn more, please visit Independent Health’s website for a copy of its pharmacy report: The Alarming Side Effects of Unchecked Generic Drug Pricing.