Generic Medication Costs

Gargantuan growing generic prices


Soaring prices force dermatologists to rethink common therapies

Prescribing treatments that best combine efficacy and affordability used to be as easy as prescribing a generic. But with the recent escalation of generic drug prices, dermatologists are finding themselves having to rethink some common treatment therapies, substituting them more often, and taking additional steps to assist their patients in obtaining the medications they need. Dermatologists are finding themselves broaching this topic more frequently with patients — something not all of them are comfortable doing.

Meanwhile, the AAD staff and its Regulatory Policy Committee are conducting an environmental scan and analysis to define the problem, noted Adam Rubin, MD, committee chair. Although the soaring cost of generic medications is a problem throughout the house of medicine, the AAD is hearing from members that these steep price increases are making it increasingly difficult for their patients to afford their medications, he said. The AAD is forming a Task Force on Drug Pricing and Drug Pricing Transparency to gather specific data about how this problem is affecting dermatology in particular. “We need to move from anecdotal reports to defining the problem in order to have a comprehensive action plan,” Dr. Rubin said. 

Dermatologists’ experiences

“Like many dermatologists around the country, I have increasingly experienced problems with the availability and wild price fluctuations for generic topical and oral medications that were previously inexpensive and easy to find,” noted Jack Resneck Jr., MD, professor and vice-chair of dermatology at the University of California San Francisco School of Medicine. “The frustration that my patients and I experience is exacerbated by the fact that some of these generic drugs seem to disappear from pharmacy shelves or skyrocket in price suddenly and without notice or any predictable patterns.”

Like Dr. Resneck, many dermatologists have learned about price spikes or drug shortages from their patients who are trying to obtain a medication. This scenario leads to significant disruptions in clinical care, he noted. “It’s darn near impossible for doctors to try and stay current on what a drug costs. I end up relying on my patients to say that their insurance won’t cover a particular drug,” echoed Mary Maloney, MD, former chair of the AAD’s Regulatory Policy Committee and chief of the division of dermatology at the University of Massachusetts. “I didn’t know there was a tetracycline shortage until I tried prescribing it and a patient couldn’t get it.”

Impacting patient care

Also increasing are the patients’ out-of-pocket expenses as pricier generics are being moved to a higher co-pay tier and dropped from discount generic drug programs. Dr. Rubin has noticed that insurance plans are rejecting fewer prescriptions as of late. In the past, an insurance plan might reject a prescription, but pay for a similar one on its formulary, he said. Now, the insurance covers the first-choice medication, but with a very high co-pay. As a result, Dr. Rubin has altered treatment plans based on the patient’s ability to pay for medications and substituted medications that may not be as efficacious.

Although the significant cost increases bother Dr. Maloney, they haven’t stopped her from prescribing certain medications provided that the patient’s insurance covers it. As an example, Dr. Maloney continues to prescribe doxycycline as it is a tremendously effective drug for treating community-acquired Methicillin-resistant Staphylococcus aureus or MRSA. On the other hand, when the medication is not covered by insurance, and there are other treatment options, she will push topicals and hold off on prescribing an oral antibiotic, such as minocycline. “The good news is there are a lot of good drugs for treating acne, so I can substitute other medications,” Dr. Maloney said. She also relies on some tricks of the trade such as using a less potent topical steroid but wrapping the affected area with plastic wrap to increase the steroid’s penetration and strength. Dr. Maloney has stopped prescribing tetracycline. “It’s hard to imagine why tetracycline, which is dirt cheap to make, is now so expensive, that is, if you can find it,” she lamented.

Peter Reisfeld, MD, has started to factor in the price of a medication in addition to its effectiveness. “If I can find a medication that is equivalent in effectiveness at a lower cost, that’s the one that I am going to prescribe,” he said. Within dermatology, there are many different generic medications that could be equivalent but at varying price points. “So you still have the ability to choose a less expensive generic if you know which ones are expensive,” Dr. Reisfeld said.

These unpredictable price fluctuations have become part of the treatment discussion, which Dr. Rubin, for one, finds awkward. “It can be uncomfortable to talk to patients about their financial ability to pay for prescriptions. The ability to pay for medications can be linked with independent financial issues in other spheres of their lives.” he said. Still, Dr. Rubin does feel obligated to inform patients of the potential high cost of generic medications, which patients may not be expecting to be the case.

Dr. Reisfeld is often amazed at how some of the costs have gone up so dramatically, he noted, as are many of the pharmacists he works with; patients whose insurance does not cover the increases are often discouraged or angry. Aside from increases in acquisition costs, another problem particularly for uninsured consumers is pharmacy markups, he said. Dr. Reisfeld recently prescribed topical imiquimod for a patient who called to say that it would cost $625 to fill the prescription at a large pharmacy chain. However, the pharmacy at Costco, which has a policy of charging a maximum 15 percent markup over its cost for generic medications, was selling the same prescription for $91. “When I’m prescribing a medication that is more costly and I know has a lot more variability in pricing, I will often tell the patient to shop around,” he said. “I think patients really appreciate when you’re trying to save them money.”

Reasons cited for the shortage

Dermatologists speculate that there may be myriad reasons for the price increases. High on the list of possible culprits is industry consolidation. A significant number of mergers and takeovers have occurred in the pharmaceutical industry in recent years, leaving the market with fewer companies manufacturing generics, Dr. Rubin said. Less competition equals higher costs. “In 2010, four of the top generic manufacturers accounted for 50 percent of all generic prescriptions in the United States,” he said. Increased regulation by the FDA may both encourage producers to drop products or discourage new competitors, Dr. Reisfeld added. “Once prices go up, the huge FDA backlog on approval of new generics prevents competition which could bring prices back down.”

Some manufacturers exit the market if the profit margins are insufficient, Dr. Maloney noted. They may abandon a drug if it is too difficult, costly, or time consuming to make.

Manufacturing glitches and FDA crackdowns on manufacturing plants can cause both supply disruptions and production lapses. According to extensive research done by Erin Fox, PharmD, a professor in pharmacotherapy at the University of Utah, some of the factors making the supply chain so fragile include global outsourcing of raw materials, tighter supply inventories, consolidation of manufacturers and suppliers and a lack of manufacturing redundancy, business decisions to purposely limit production, and serious quality control problems leading to regulatory enforcement that may include factory shutdowns.

The most significant manufacturing glitch driving prices up is a raw material shortage, as in the case of tetracycline and doxycycline. As far back as two years ago, pharmaceutical manufacturers reported discontinuing production of tetracycline, some due to a lack of active ingredient and others for reasons that are unclear. The generic was reintroduced and both the American Society of Health-System Pharmacists and FDA reported that the shortage was resolved in March 2014. “Yet the price is still astronomical,” said Dr. Reisfeld, who is skeptical as to how much of a role material shortages play in these price spikes. Sometimes a drug suddenly escalates in price and then seems to vanish. “But they don’t really disappear,” he explained, “it’s just that independent pharmacies are leery to order them.” Since it can take several weeks for the third-party payers to increase their reimbursements, pharmacies that order a medication too soon can suffer substantial losses. Rather than taking the loss, the pharmacists say they just can’t get the medication, he said.

Legislative efforts

That is why in January 2014, the National Community Pharmacists Association (NCPA) asked congressional leaders to hold an oversight hearing to investigate the reasons behind the skyrocketing costs of generic drugs, which represent approximately 86 percent of all prescriptions dispensed in the U.S., according to a 2014 report by the IMS Institute for Healthcare Informatics. In October 2014, Sen. Bernard Sanders (I-Vt.) and Rep. Elijah E. Cummings (D-Md.) launched an investigation, sending letters to 14 drug manufacturers requesting information from 2012 to the present, including total gross revenues from sales of the drugs, prices paid for the drugs, factors that contributed to decisions to increase prices, and the identity of company officials responsible for setting drug prices. At the November hearing of the Senate Subcomittee on Primary Health and Aging, an NCPA representative testified about the lag in reimbursement rates provided to pharmacists by pharmacy benefit managers (PBMs) that have resulted in significant revenue losses. According to a member survey, NCPA found that nearly 86 percent of more than 1,000 pharmacists reported that it took PBMs or other third-party payers as long as six months to update their reimbursement rates to pharmacies, resulting in reimbursement rates significantly less than the acquisition costs.

Moreover, several pieces of legislation, many of which were bipartisan, were introduced in Congress last year. (See sidebar for a description of the various bills.) But as Dr. Rubin put it, “Unless the legislation is ultimately signed into law, it is just a discussion.” Dr. Reisfeld believes that legislative efforts might reduce drug costs for a select patient population, but will not resolve the problem. He is also concerned that legislation may limit the potential benefits to suppliers, risking driving more of them out of the market, which could worsen the problem.

But before devising a solution, the causes behind the escalating costs of generic drugs have to be determined. “The first thing I would recommend is an expert economic analysis because there is still quite a bit of murkiness as to exactly what is responsible,” said Dr. Reisfeld, who is not optimistic that the drug companies will cooperate given that they refused to testify at the recent congressional hearing. (Similarly, drug companies contacted for this article did not respond to interview requests or written questions.)

What can dermatologists do?

In the meantime, there is one thing that physicians can do. One of the reasons that supply and demand doesn’t work well to keep generic medication prices down is that insurance reimbursement insulates patients from the high prices, Dr. Reisfeld explained. Consequently, demand remains high. “If physicians become more familiar with drug pricing, then they will be in a better position to choose treatments that are effective without being overpriced,” he said. “Reduced demand from physician prescribing may help to actually bring prices down. That way we can help to protect both the medical and the financial health of our patients.” Dr. Reisfeld encourages dermatologists to talk to their local pharmacists about the price surge, check their e-prescribing programs for drug pricing information, and/or download the drug database posted on the LIDS website (see sidebar, “Tracking skyrocketing prices”).

“We will need to be more proactive in becoming more educated about pricing of medications,” Dr. Rubin concurred.