Tuesday, October 07, 2014

Congress Grills Generic Drug Makers Over Price Inflation

Why do generic drug prices continue to rise? In theory, sky-high inflation for a particular product should encourage new suppliers, thereby lowering prices.

Looks like Congress is also curious about the mystery of persistent generic drug inflation. U.S. Sen. Bernie Sanders (I-VT) and U.S. Rep. Elijah E. Cummings (D-MD) sent information requests to 14 generic pharmaceutical manufacturers. Below, I list the companies and provide direct links to the letters.

As you can see from the questions (also listed below), the congressmen are requesting details about pricing, contracts, purchasers, costs, and other internal details.

Political grandstanding, or a potential turning point for generic inflation? Even the most interesting man in the world doesn't know.


For background about the generic drug inflation trend, see these Drug Channels articles:

The 14 following companies received letters from Senator Sanders and Representative Cummings. Each link points to that company’s letter, so you can download your favorite.
In each letter, the congressmen highlight company-specific products that have experienced big price jumps. They rely on the same National Average Drug Acquisition Cost (NADAC) data set that I used in my previous analyses.

According to GPhA disputes lawmakers on generic prices, the Generic Pharmaceutical Association (GPhA) challenged the data, partly by citing Drug Channels. I'm flattered, but want readers to know that I have no relationship with GPhA and didn't know that GPhA was going to cite my work. (I don't even have a copy of the letter!)


The congressmen requested that each company provides “the following documents and information for the time period covering January 1, 2012, to the present”:
  1. total gross revenues from the company's sales of these drugs;
  2. the dates, quantities, purchasers, and prices paid for all sales of these drugs;
  3. total expenses relating to the sales of these drugs, as well as the specific amounts for manufacturing, marketing and advertising, and purchases of active pharmaceutical ingredients, if applicable;
  4. sales contracts or purchase agreements for active pharmaceutical ingredients for these drugs, including any agreements relating to exclusivity, if applicable;
  5. a description and valuation of the specific financial and non-financial factors that contributed to your company’s decisions to increase the prices of these drugs;
  6. any cost estimates, profit projections, or other analyses relating to the company’s current and future sales of these drugs;
  7. prices of these drugs in all foreign countries or markets, including price information for the countries paying the highest and lowest prices; and
  8. the identity of company official(s) responsible for setting the price of these drugs over the above time period.
Will the companies answer these questions? If so, will we see the answers? Consider what happened (or didn't) when Senator Charles Grassley (R-IA) asked Walgreens to provide details about its 340B contract pharmacy operations. If he ever received a response, it has yet to be made public. Hmmm…


  1. Linked are some of the articles that show a methodology of how to reverse calculate drug costs and compare them going forward from the active ingredient costs.

    1) Why Fitting a Square Plug in a Round hole is Profitable for Pharma and Most Likely Will Stay? http://pharmachemicalscoatings.blogspot.com/2014/08/why-fitting-square-plug-in-round-hole.html

    2) A Blueprint for Improved Pharma Competitiveness http://www.contractpharma.com/issues/2014-09-01/view_features/a-blueprint-for-improved-pharma-competitiveness/

    3) Toward a Process-Centered Pharma http://www.contractpharma.com/issues/2014-06-01/view_pharma-beat/toward-a-process-centered-pharma/

    Pharma companies have not tried to innovate their business and manufacturing practices but have passed on their inefficient practices to the patient and added extra profits for the rainy day.

    Yes generics can and have an opportunity to lower costs and improve profits but they do not want to take a scorn look at the "golden goose".

  2. As a community pharmacist who actually Knows how much the drug costs for us to order, those data presented in the letter are fairly accurate. These generic manufacturers do have some answering to do...

  3. It looks like the letters refer to some sort of GPO survey for their price assertions, rather than NADAC. Am I missing something? Also, why wouldn't just looking at the weighted average AMP data on the CMS FUL website make a heck of a lot more sense?

  4. I also see no call out that NADAC was used.

  5. I really hate to comment, but I expect that these manufacturers will tell these politicians to go pound sand...indirectly.
    I'm not sure why folks expect the business ethics of big pharma (who owns these 'generic' houses?) to differ from any other publicly traded company just because they sell medication. Why do we feel entitled to the result of another person's labor? I invite anyone who can manufacture pharmaceuticals in today's regulatory environment to (please!) do so. When you are up and running, set your own reasonable price. Otherwise, go pound sand.

  6. NADAC is mentioned in the footnote to this Fact Sheet. It was prepared by the Healthcare Supply Chain Association (HSCA), a trade association that represents GPOs.

  7. Did I miss the investigations where they questioned manufacturers about falling generic prices or are they only focusing on the items that went up in price?

  8. As a whole generic drugs have increased at an alarming rate, while we are seeing very few decreases. We have seen overnight increases in many commonly used medications with no rhyme or reason for the madness. Thus making it virtually impossible for the uninsured or those with high deductible plans to afford common generics. The simple fact is drug manufacturers have put a major squeeze on the industry when price per bottle inflate up to 1000% overnight. This leaves the pharmacy waiting 6 to 8 weeks for the insurance to adjust reimbursement all while taking a pounding on drugs we use everyday. Common creams, antibiotics, seizure medications, and now pain meds are increasing at an alarming rate. Our patients cannot go without them and we've signed a contract stating that if we have them in stock we must dispense. My personal pharmacy that averages less than 150 scripts a day had negative margin report with 26 prescriptions at a 2200 loss for a two week period. It is very hard to make that money up. This is very real, please elaborate on your point of falling prices. I've took up to a 267 dollar loss on a steroid ointment for a Medicare patient, so that I wouldn't lose a customer. I drug that use to cost 17 dollars way back at the beginning of october is now 396 dollars a tube to purchase. That is certainly something to be investigated. I won't name drug names or generic manufactures but this seems to be a common trend as of late. Answers are needed

  9. Today I bought one of my meds, that unfortunately I have to pay cash for, because insurance companies seem to think women do not need hormones when they have been surgically altered. Today I paid about 150 bucks more than I normally do. They told me it was because they ran out of the generic, so they filed with the 200 dollar brand... Had I not been able to pay, I would have been not able to afford it. I called another small pharmacy in my town and wow, they had it for 150 dollars less. The thing that pisses me off, is I worked in billing for a hospital and for many Dr's offices in the past.. and I know how things and prices are manipulated. It's not right. There is NO reason to charge such exhorbanant prices, for the same thing, over and over. It's a medication not a dam stock. I'm going to the top.. I've had enough