A Comprehensive Look at the Impact of Rising Generic Prices

By John Norton

Elsevier Clinical Solutions recently issued a white paper, “The Impact of Rising Generic Drug Prices on the U.S. Drug Supply Chain,” based on a survey measuring the attitudes of stakeholders throughout the pharmaceutical supply chain. The second paragraph details how rising generic prescription drug prices impact everyone:

“High generic drug prices have had an adverse effect on almost everyone in the pharmaceutical supply chain. Consumers face higher co-pays and prices and health plans are dealing with higher drug spend. Physicians are finding the need to prescribe alternative drug therapies while dealing with angry patients. In some cases, consumers are declining their medications due to increased prices. Many pharmacies are receiving inadequate reimbursements and can lose money when drugs must be purchased at rapidly rising prices but reimbursed at lower predetermined rates. Pharmacists are also working with providers to recommend alternative treatments in order to help consumers understand and afford their medications. Generic drug manufacturers are facing increased government regulation.”

The white paper includes analysis based on surveys from respondents who work for health plans, pharmacy benefit managers (PBMs), retail pharmacies, drug wholesalers, manufacturers and other health care providers that are most illuminating:

  • Over 75% ranked manufacturing consolidation as the first or second most likely cause of the price increases;
  • A whopping 91% indicated their business have been affected by the rising prices, with 62% classifying the impact as negative and only 5% as positive;
  • In terms of monitoring the prices fluctuations, 40% said that had become a daily task and 15% a weekly task;
  • When it comes to mitigating the cost of rising prices 21% relied on substitution, 20% on renegotiation of contracts, and 18% on increasing customer costs; and
  • As for predictions, 82% believe the average price of generics will continue to rise, and none saw a deflation in those prices on the horizon.

The white paper devotes time to the issue of pharmacies’ reimbursements often being lower than their rising acquisition costs. It is pointed out that relief is coming as “a number of states are addressing this very issue with drug price transparency laws that require PBMs and payers to not only share their maximum allowable costs (MAC) price lists with network pharmacies, but also to explain and justify their methodology.”

The paper also notes that in 2016 the Centers for Medicare and Medicaid Services (CMS) will “be requiring something similar from payers handling Medicare Part D business”. These are welcome developments because according to the 2014 NCPA Digest, sponsored by Cardinal Health, 34% of the average independent community pharmacy’s prescriptions come from Medicare Part D and 78% of overall prescriptions are generic.

NCPA continues to aggressively advocate for the passage of H.R. 244, the MAC Transparency Act, which applies the same sort of solutions to not only Medicare Part D, but also to the military’s TRICARE program and the Federal Employees Health Benefits Program (FEHB).

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