Straight Dope on Medicine: Pharmaceutical Price Hikes

Author

Scott Ganser
December 18, 2023

Marketwatch

Are drug prices rising?

It’s a rhetorical question.

Everyone knows they are.

The remaining questions are: “how much?”  and “Can Elon Musk afford them?”

Prescription drug price increases create affordability challenges for patients and for the government. This ASPE report tracks drug price changes from 2016-2022. There were 1,216 products whose price increases during the twelve-month period from July 2021 to July 2022 exceeded the inflation rate of 8.5 percent for that time period. The average price increase for these drugs was 31.6 percent. Some drugs in 2022 increased by more than $20,000 or 500%. The Inflation Reduction Act introduces a new requirement for manufacturers to pay rebates to Medicare for Part D drugs whose price increases exceed inflation, beginning October 1, 2022, which was designed to reduce the frequency and size of drug price increases.[i]

List prices are those prices set by manufacturers, which determine what a patient pays at the pharmacy. Net prices account for rebates that are paid directly to pharmacy benefit managers (PBMs) and plans after the fact. Rebates as a percent of total drug spending have grown in recent years from 11.7 percent in 2012 to a projected 32.5 percent in 2022.[ii]

January is the BIG MONTH, when pharmaceutical price hikes are in vogue.

However, some deception is built in. Number and amount cannot be conflated. If there are four price hikes of one dollar, and one price hike of one hundred dollars, the one price hike is the killer and the four price hikes are more of a nuisance.

Of the over 3000 price increases in January, 2022, 241 exceeded the greater than 10 percent and $20 threshold, while 248 exceeded the $500 threshold. Of the 601 price increases in July, 43 and 66 exceeded these thresholds respectively. Combined, these results indicate that 15-18 percent of price increases in those two months were significant increases, based on our study criteria.

Various factors can go into price hikes: cost of goods, market competition, seeing how much you can get away with, patent expirations, greed and change in prevalence of condition.

Notice that you don’t see price roll backs. Prices only go one direction: UP.

The Association of Accessible Medicines is not telling the whole story. Generics can reduce prices, for a while. Then the generic drug company or companies jack their prices up as high as they can as well. Typically, they will have driven the branded drug out of the market, and they don’t have any competition or little competition.[iii]

The group-based trajectory analysis identifies some generic drugs that show a fast pace of price increases over the period 2010–2017. The GBTM (group-based trajectory model) estimations indicate that 14.4% of the generics in the low-price range show rapid price increases; while 25.2% of generics in the medium price range and only 6.0% of generics in the high price range show a rapid trajectory of price increases.[iv]

Don’t get it twisted, generics do offer substantial savings when they first come in.[v]

Branded is Higher Quality.

Don’t let the government lie to you. Branded is better. Questions to answer are: “How much?” and “Is it important?”

A Canadian study published in the October 2017 issue of Circulation: Cardiovascular Quality and Outcomes revived discussion about the value of those lower-priced alternatives. It found that patients who took generic versions of three different blood pressure medications in the months after the generic drugs became available saw increased rates of drug-related side effects. Study authors said this might suggest performance differences between the brand-name and generic drugs.

In order to get a stamp of approval from the FDA, a generic medication must be "bioequivalent" to its brand-name counterpart. This means that chemically the two must be pretty much the same, although makers are allowed 20% variation in the active ingredient from that original formula. "While the FDA does allow for up to 20% wiggle room, in reality the observed variation is much smaller, 4%," says Dr. Choudhry.

The researchers looked at the numbers of emergency room visits and hospitalizations for 136,177 individuals ages 66 and over (60% of them women) who used any of three blood pressure medications: losartan (U.S. brand name Cozaar), valsartan (Diovan), and candesartan (Atacand). They examined data for the periods 24 months before and 12 months after the generic versions of these medications went on the market.

They found that before the generic versions became available, about one in 10 people taking the blood pressure drugs had to go to the emergency room or be hospitalized each month. In the month after each of the generics went into use, the rates of these adverse events went up: 8% for losartan, almost 12% for valsartan, and 14% for candesartan.

As the cost of prescription medication soars, consumers are increasingly taking generic drugs: low-cost alternatives to brand-name medicines. Often health insurance plans require patients to switch to generics as a way of controlling costs. But journalist Katherine Eban warns that some of these medications might not be as safe, or effective, as we think.[vi]

Eban has covered the pharmaceutical industry for more than 10 years. She notes that most of the generic medicines being sold in the U.S. are manufactured overseas, mostly in India and China. The U.S. Food and Drug Administration states that it holds foreign plants to the same standards as U.S. drugmakers, but Eban's new book, Bottle of Lies, challenges that notion. She writes that the FDA often announces its overseas inspections weeks in advance, which allows plants where generic drugs are made the chance to fabricate data and results.

"These plants know that [the FDA inspectors are] coming," Eban says. "I discovered [some overseas drug companies] would actually ... alter documents, shred them, invent them, in some cases even steaming them overnight to make them look old."

As a result, Eban says, generic drugs sometimes go to market in the U.S. without proper vetting. She describes the FDA as "overwhelmed and under resourced" in its efforts to ensure the safety of overseas drug production.

Eban advises consumers to research who manufactures their generics and look up any problems that regulators have found out about them. But some consumers may find they are not allowed by their health plan to switch to alternatives, because of cost.

Eban also asserts situational ethics.

If you are rich and pay more, your situation is better.

“Generic-drug makers are adjusting the level of quality in their manufacturing depending on which market their drugs are going to, and depending upon the vigilance of the regulators in those markets. So, they will take their biggest shortcuts, their biggest swaps of high-quality to low-quality ingredients, in markets with very poor regulation: sub-Saharan Africa, Southeast Asia, areas of South America.”


[ii] 4 2022 Annual Report Of The Boards Of Trustees Of The Federal Hospital Insurance And Federal Supplementary Medical Insurance Trust Funds. https://www.cms.gov/files/document/2022-medicare-trustees-report.pdf