Many Generics Are No Bargain

Generic drugs have been considered bargains. Unfortunately, prices of many generic drugs have skyrocketed. An example in the news is the generic medication albendazole used to treat parasitic infections. In 2008, the average cost per prescription was $36.10. By 2013, the average cost per prescription was $241.30. The 2016 cost in Peoria is now $343.11 for two tablets. Although many would consider this price gouging, there is currently no legal limit on generic medicine’s price increases. Unfortunately, this is not the only example of a generic medication with a major price increase.

In the United States, generic drugs cannot be sold until 20 years after the date of discovery of the drug. Since the 20 years patent includes the time needed to get a drug approved, the earliest a generic can be sold is typically 12 years after a drug is brought to market. In the past, there were concerns about generic drugs not being equivalent to brand name drugs. Significant differences between brand name medications and generics are now rare since Congress passed the U.S. Drug Price Competition and Patent Term Restoration Act in 1984. This act requires generic manufacturers to demonstrate therapeutic equivalence. Generics are usually 20-80 percent cheaper than brand name drugs because of competition.

To avoid competition, companies have used a variety of techniques including taking advantage of raw material shortages, paying companies not to manufacture a competing generic and buying a competing company. Some price hikes are for medications with a natural monopoly because they are needed by a very small number of patients. It is legal to buy a company that produces a lifesaving medication for a small number of patients cheaply and increase the price 10 times or more.

In 2006, Walmart started a $4 a month generic medication program. Changes in this program illustrate trends in generic pricing. We found 100 fewer medications in the 2015 list than the 2008 list. Only six new medications were found in the 2015 list and five of them were birth control pills. One example of a major price increase is the price jump for the antibiotic erythromycin from $4 to $287 dollars for twenty-eight 250mg tablets. A second example is the increased cost of colchicine, a medication used to treat painful joints caused by gout from $4 to $99 dollars a month. Even medications that still seem reasonably priced have had significant price increases. The $15.13 price for a month’s worth of the cholesterol mediation pravastatin reflects a 378 percent increase, and the $33.06 price for a month’s worth of the arthritis medication piroxicam reflects an 826 percent increase.

Currently, generic drug manufacturers can legally create a market monopoly and then raise prices. To violate antitrust laws, competitors must conspire to raise prices. High prices can encourage other companies to get approval to manufacture a generic, but the process takes about a year.

The effect of the current situation is that fewer low cost generics are available and many have had significant price increases. It has gotten harder for everyone to receive cost effective medical care.

Key References

1. Alpern JD, Stauffer WM, Kesselheim AS: High-Cost Generic Drugs — Implications for Patients and Policymakers. N Engl J Med 2014; 371:1859-1862
2. http://i.walmart.com/i/if/hmp/fusion/four_dollar_drug_list.pdf – Walmart Generic Drug List 2008
3. http://i.walmart.com/i/if/hmp/fusion/genericdruglist.pdf Walmart Generic Drug List 12/25/2015
4. http://www.goodrx.com/ – For current Peoria Drug Prices