Prices of generic drugs soar as mergers reduce competition

Prices of generic drugs soar as mergers reduce competition
July 08 01:00 2014

Prices of generic drugs soar as mergers reduce competition

In the 34 years Gary Roberts has been a pharmacist, he has never witnessed such large percentage increases in the cost of many generic drugs.
Roberts, president of Roberts’ South Bank Pharmacy in Jacksonville, doesn’t pretend to know all the reasons, but suspects one factor may be the recent rash of consolidations and mergers in the pharmaceutical industry.

He isn’t alone in his suspicions.

Many other observers of the pharmaceutical industry see consolidation as a troubling indicator of continued price increases, which will have a dramatic impact on consumers.

Hardly a week goes by without news of another acquisition in the pharmaceutical industry. The airline and the cable industries are prime examples of how those consolidations lead to higher prices. But while consumers can choose to travel by car or cut their cable cord, they are frequently compelled to pay higher generic drug prices to treat their ailments.

A generic drug must contain the same active ingredients as the brand-name product and must be comparable in quality, dosage form, strength and performance. When the patent of a brand-name drug expires, competition increases, hence the far lower prices of generics.

Much, much lower prices — until now. That’s troubling for Roberts and other pharmacists because more than 85 percent of all prescriptions are for generics.

The rise in generic drug prices first became evident in 2013 and the increases are continuing this year, Roberts said.

“Generic drug inventories that have been plentiful for years suddenly won’t be available for a time,” he said. “When they come back on the market, the price is exorbitant compared to what it used to be.”

One example is the eye drop Pred Forte, the brand name for a generic equivalent of prednisolone acetate ophthalmic suspension. It is prescribed as an anti-inflammatory drug for eye surgery patients.

Roberts said he had been able to acquire the generic drops for $6 per bottle as recently as last year. Today, that price has shot up to nearly $90 a bottle.

“Our biggest problem is patients who simply walk away when they learn of the price increase,” he said. “Even if they have insurance, the new plans have high deductibles. Years ago, if you had a deductible, it was usually on major medical expenses. Now they are all lumped together.”

Pacific Pharma Inc., a generic manufacturer, produces the eye drops ordered by Roberts. The company is owned by the pharmaceutical giant Allergan USA Inc. based in California, which developed the brand Pred Forte.

Allergan therefore controls both the branded and a generic manufacturer of the drug. Allergan is in the midst of a hostile takeover battle with Valeant Pharmaceuticals. An Allergan representative did not respond to repeated email and telephone requests to comment on the price increases.

But in a transcript of May 7 earnings teleconference, Allergan’s CEO David E.I. Pyott discussed Pred Forte with industry analysts. He said after competitor Sandoz increased the price of its generic drug, Allergan “increased our prices of the generic to parity with Sandoz as well as increasing the price for branded Pred Forte by 80 percent.” Allergan reported first-quarter sales increases of 12 percent, marking the fourth sequential quarter of year-over-year double-digit growth for the company.

Sandoz is the generics unit of pharmaceutical giant Novartis. Leslie Pott, vice president of communications at Sandoz, confirmed price increases for the eye drops, citing supply issues caused by equipment problems at the Sandoz manufacturing plant. Nevertheless, she said, even with the increase, their generic drops were 50 percent less expensive than the brand price.

“Pricing of key products is reviewed regularly, taking into account all relevant factors including regulatory and production costs,” she said.

Sandoz and Pacific Pharma are the only two generic manufacturers of the eye drops. Large brand-name pharmaceutical companies therefore control both generic companies and consequently the market for these drops.

The eye drops aren’t an unusual example of what is happening with many generic drugs. According to the National Community Pharmacists Association, 77 percent of their members experienced 26 instances of a large increase in the acquisition price of a generic drug within the last six months.

More than 84 percent of pharmacists said price fluctuations resulted in some patients refusing their prescriptions because of costs. For independent pharmacists already squeezed by large chain pricing, this trend has raised concerns about some of them remaining in business.

“There is no question that with generic drugs with multiple manufacturing sources, there are much lower price increases because competition is a factor. Generally, we find the more competitors in the market, the lower the price. Today, we are seeing fewer manufacturers and consequently the competition decreases,” said Robert Navarro, clinical professor in Pharmaceutical Outcomes and Policy at the University of Florida. Navarro has practiced pharmacy as a medical center pharmacy co-owner, hospital clinical pharmacist, medical school geriatrics pharmacology instructor and a long-term care consultant pharmacist.

Another university pharmaceutical expert, Robert Kemp, an economist at the University of Louisiana at Monroe, sees price increases occurring in particular generic therapeutic areas.

“If you have one company with multiple products in one therapeutic area such as hypertension you will see improved capability to get and maintain premium prices,” Kemp said.

The Department of Justice and the FTC have been active in the pharmaceutical industry. Pharmaceutical companies have agreed to pay more than $13 billion to resolve allegations of fraudulent marketing practices. One of the largest settlements ever was paid by a pharmaceutical company. In 2009, Pfizer agreed to pay $2.3 billion to settle charges that it illegally promoted certain drugs.

The FTC also has also filed actions forcing pharmaceutical companies to divest interest in certain generics before a merger. In Fiscal 2012, for example, the agency challenged proposed mergers by Valeant, Novartis and Teva Pharmaceutical Industries because it alleged competition in the generic drug area would be harmed by the proposed acquisition.

Despite these actions, merger activity in the pharmaceutical industry continues. And at the current pace, Roberts fears his pharmacy and his customers will likely see price increases for generic drugs well into the future.

Read full story at Florida Times-Union
write a comment


No Comments Yet!

You can be the one to start a conversation.

Add a Comment