From Pembroke Consulting, published on DrugChannels.net

Yesterday, Senator Bernie Sanders (I-VT) held a hearing in front of the Senate Health, Education, Labor and Pensions Subcommittee on Primary Aging and Health entitled “Why Are Some Generic Drugs Skyrocketing in Price?” Bizarre drug price increases of 1,000% and up are becoming more common. This problem is not new: in the beginning of this year the People’s Pharmacy reported a 6,000% increase in the price Doxycycline!

Senator Sanders noted that the price of Digoxin, which treats congestive heart failure, has increased 883% from 12 cents to $1.06 per pill from 2013 to 2014. Migraine drug Divalproex Sodium ER spiked 881% from 27 cents to $2.38 per pill.

We are always ecstatic when Congress scrutinizes the obscene drug prices in America, and we applaud Sen. Sanders, but our focus is on what can be done now so that people today don’t go without needed medications. In his introductory remarks, Sen. Sanders said: “Drug prices in the country are by far the highest in the world.” Let’s elaborate on that.

First, it is still common for generic drug prices to be lower in the U.S. than in Canada or other countries (typically known to have much lower drug prices than the U.S). We’ve been reporting about low cost U.S. generics since 2003 and we continue to strongly encourage Americans to seek out low cost generics at U.S. pharmacies, but they won’t always do the trick. We just released a new price analysis on PharmacyChecker.com to show that many generics, which have become prohibitively expensive domestically, have much lower cost brand name equivalents at foreign pharmacies, ones sold by verified international online pharmacies in our program. As shown in the chart below, looking at ten drugs we found foreign brand counterparts were on average 87% less expensive. For our full drug price analysis see our press release.

A patented brand name drug is usually very expensive because there is only one company making it: that company can set the price at the highest rate the market will tolerate (at least in the U.S.).   In contrast, generic drugs are usually much cheaper due to competition among different pharmaceutical companies making the same drug (which also makes the U.S. special!). There is a federal investigation of certain generic drug companies for possible anticompetitive practices.

Common explanations for the generic drug price increases usually pertain to fewer companies competing in the marketplace, as alluded to above. Reduced competition is caused by more companies leaving the market, consolidation among companies that make the same generic drug, and regulatory actions through which suppliers are shutdown or their products banned from the market. Perhaps that investigation will discover collusion and illegal practices among pharmaceutical companies as an explanation as well but that remains to be seen.

Congressman Elijah Cummings (D-MD) was the first witness to testify at the hearing. He told the subcommittee that many of his constituents contact his office to say that they cannot afford their prescribed medication. His message was that he will not “remain silent” on this issue. I like that message. Rep. Cummings and Sen. Sanders have introduced legislation – the Medicaid Generic Drug Price Fairness Act – that would force generic drug companies to pay rebates to offset government expenditures for Medicaid when generic drug prices increase by more than the rate of inflation, something currently imposed on brand named drug companies.

One expert witness, Scott Gottlieb, MD, a resident fellow at the American Enterprise Institute, made the point that the greatest drug price increases are only for a small number of generics, most with small market sizes of $10 million or less. However, according to data from the Centers for Medicare and Medicaid, generic drug price increases are rampant and not limited to a small number of drugs. To quote from Sen. Sanders’ website:

…federal records made public at the hearing show the price for 1,215 generic drugs increased 448 percent on average from July, 2013 to July, 2014. During that period, nearly 10 percent of all generic drugs more than doubled in price, according to the analysis of data from the Centers for Medicare and Medicaid Services.

Testimony by Stephen W. Schondelmeyer, PharmD, PhD, Professor and Director, PRIME Institute, University of Minnesota College of Pharmacy, elucidated on the economic reality that the generic drug pricing issue is not a glitch, or a temporary issue, but a comprehensive and systemic one – and that brand and generic drug prices are a serious public health and economic threat.

Pharmacist and pharmacy owner Robert Frankil, RPh testified that he buys and sells pharmaceuticals every day and he has experienced seemingly unexplainable jumps in generic drug prices that happen overnight. The price of a drug is often set through reimbursement rates agreed to between pharmacies and pharmacy benefit managers. As explained by Mr. Frankil, spontaneous price spikes mean that he sometimes loses money on the sale of generic drugs when the reimbursement cost is lower than the wholesale cost he pays for the drug. Generic price spikes can hurt pharmacy owners as well as individual consumers.

Carol Ann Riha, a consumer and former Associated Press journalist, spoke eloquently about how drug costs are forcing her and her husband into higher and higher debt. She has health insurance, which she attributed to the Affordable Care Act (Obamacare) but her out-of-pocket prescription costs appear to have doubled from $849 to $1,700 this year – in large part due to higher generic drug prices.

On a very long closing note, I want to mention Senator Elizabeth Warren’s (D-MA) participation in the Senate hearing because the issues she raised are relevant to the issue of drug importation and prices generally. Apparently, Dr. Gottlieb blames FDA regulatory actions that ban the products of certain drug manufacturing plants for supply shortages that in turn lead to higher drug prices. He has a point; if the FDA prohibits generic drug makers from supplying the U.S. market there is less competition. Senator Warren wasn’t having it. She noted that only 11 FDA warning letters were issued to drug manufacturers about manufacturing problems last year out of about 7,000 FDA letters in to show that any charge of “over regulating” as causing higher drug prices is misguided.

Senator Warren also vehemently defended the FDA’s regulatory role to protect the safety of medications sold in America, noting that FDA had found serious manufacturing problems at several Indian drug makers that supply the U.S. market and for good reason banned importing products from those plants. She has a good point – but the risk/benefit calculus on when to ban drug products from the market, whether made in the U.S. or imported, is difficult to perfect. Mr. Gottlieb suggests a more lax standard whereby regulators only ban products from plants where drug safety and efficacy is clearly diminished. Drawing the right balance is the responsibility of the FDA.

I hope Senator Warren and her colleagues look behind the curtain of this issue to investigate how incredibly safe and affordable, but unfortunately often illegal, personal drug imports can be. For instance, we’ve proven that brand name imports are sometimes much cheaper than U.S. generics. We believe it would be foolish to argue that big pharma’s brand name drugs sold outside the U.S., whether in Canada or in India, are less safe and effective than their more expensive U.S. generic drug counterparts. To help American consumers today, leaders in Congress should speak up loud and clear about helping Americans personally import safe and affordable prescription drugs if they can’t afford the ones here – brand or generic.