Authorized Generics Explained

Authorized Generics Explained

Drugmakers’ latest gambit explained: Designed to extend market exclusivity and stifle or delay competition, authorized generics can be more profitable than brand.

In 1984, the Hatch-Waxman Act established the modern generic drug business by establishing rules for safety and competition, including granting six months of market exclusivity to the first generic rival to each brand. Big Pharma found a way to circumvent that.

Their latest (and most important) parlor trick: Authorized Generics.

Designed to stifle competition and circumvent rebate deals with Pharmacy Benefit Managers, authorized generics are one of the most profitable market sectors for drug makers, returning $50 for every $1 invested. (This according to a report by Cutting Edge Information.)

It’s not as if they don’t want us to know this. We are not their audience.

Speaking to wall street analysts in March, Dominique Monnet, CEO of PDL BioPharma Inc. (NASDAQ: PDLI) noted that the release of an “authorized” generic version of its high-blood pressure medication, Tekturna, “was timed to secure us the benefit of being first to market…” and that the plan is “to maximize profit at this point.”

WHAT IS AN AUTHORIZED GENERIC?

For years, drug makers struck deals in order to keep generic competitors off the market, paying exorbitant sums in “reverse payments” to retain market exclusivity. A 2013 Supreme Court decision ended all that, ruling that those same deals could be challenged in court under anti-trust laws.

Authorized generics are Big Pharma’s workaround.

Pfizer very generously offers a definition on its website: “Authorized generics are manufactured by the innovator company and are the same as the brand name drug in all aspects, with the exception of not using the brand name on the label.”

Often sold by a subsidiary company, authorized generics offer a number of competitive advantages for drug makers (again according to Cutting Edge Information, data provider of choice to 22 of the top 25 pharmaceutical companies).

  • Can be first to market with an “authorized” copy during the life of its patent.
  • Shares FDA approval with the original brand-name drug.
  • Offers the appearance of increasing competition. (see: EPIPEN, below)
  • Allows the original drug maker to circumvent established deals with PBMs and payers.

Authorized Generics Explained

What’s not to love if your goal is to “maximize profit” and extend the life of your patent? It’s called “life cycle management (LCM),” and it deals a direct blow to payers, confusing both patients and physicians, all in the name of profiteering.

DRUG LCM AND YOUR PHARMACY BENEFITS

Authorized Generics have the added benefit of allowing drug makers to say that they are doing something about the high cost of prescription drugs. Critics, however, note that the effect is just the opposite:

According to a superb article from Jay Hancock and Sydney Lupkin, writing for Kaiser Health News, “There are now nearly 1,200 authorized generics approved in the U.S…. While these might look like products that would push prices down, authorized generics can be as profitable as, if not more profitable than, brand-name drugs.”

Take the case of Mylan’s EpiPen – the company introduced a generic version in response to public outrage (and congressional pressure) after the company raised the price for its branded version 400%. The catch? At $300 the Authorized Generic is still much more expensive than it was when Mylan purchased the rights to produce EpiPen.

Most importantly for self-funded payers, authorized generics usually aren’t subject to rebates that flow from the drug maker to middlemen.

Epi Pen Price Increases

KEEPING OUR EYE ON THE BALL

According to Kaiser News: “Authorized generics don’t just steal sales from existing generic rivals. Critics say they erode incentives to make generic drugs… and make sure that generics can’t get much of a foothold when they do get to market.”

TekTurna’s “authorized” copycat hit the market in March, stealing momentum from its new rival and protecting sales even after Tekturna’s patent ran out.

More recently, drug maker Eli Lilly promised a “generic” version of its Humalog insulin, ostensibly to address out-of-pocket costs for patients. The list price for the authorized generic of Humalog insulin is half the brand price, a tidy discount for the uninsured, no doubt.

Kaiser again: “But the move won’t cost Lilly any money, said another senior pharmacy benefits executive who asked for anonymity to speak candidly about a vendor. After rebates, $137 is about what the drug giant nets for Humalog now, the executive said. And it’s still far higher than what insulin costs in other countries.”

The only way to stay ahead of Big Pharma on this is to become better, more informed consumers, and that means giving plan members the tools to make decisions that save them money, while at the same time saving money for the plan overall.

That’s where Scripta can help.

We are the pharmacy benefits experts because we know how to enlist plan members as partners, ensuring cost sustainability and the future of your benefits plan.

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A Brave (Expensive) New World for Payers

A Brave (Expensive) New World for Payers

We are in an era of million-dollar drugs. As expensive gene therapies become available, concerns among payers and physicians turn to cost sustainability.

Doctors do not generally know how much drugs cost at the time they prescribe them. That is a result of both marketing – Big Pharma is very good at it – and of our system of employer-based coverage. A drug that is free to one patient might cost another (and his health plan) thousands of dollars per fill.

Dr. Paul S. Bradley and other doctors who do know how much drugs cost greet each new record-setting price tag with trepidation. We know that patients will cut corners on medications they can’t afford, jeopardizing treatment programs, which means chronic conditions go unmanaged and little problems become big, expensive problems.

At the same time, it is hard not to get excited about the new wave of genetic therapies. The latest, Zynteglo, was approved for patients aged 12 years and older that suffer from a rare form of anemia. The pricetag: $1.8 million dollars.

“I’ve been following with fascination,” Dr. Bradley says. “It used to be that drugs were priced so the average guy could afford them, and in recent years maybe afford them with a bake sale. Now even if the entire community wanted to help, you probably couldn’t afford these treatments.” (More on crowdfunding below.)

Dr. Bradley is a realist: “These are miracle drugs, albeit with no guarantee and very short track records. The news that Novartis manipulated data before approval is concerning to say the least. Regardless, we are going to have to make some hard choices and do some difficult math if we are going to be able to afford these new gene therapies.”

A NEW MOST EXPENSIVE DRUG EVERY MONTH

Imagine a therapy that can spare a child a lifetime of blindness?

Spark Therapeutics received FDA approval in 2017 for Luxturna, the first gene therapy to treat an inherited disease, a form of congenital blindness. The price for the one-time treatment is $850,000.

Few health plans can take that kind of hit – but what benefits manager would refuse treatment to a child, or to new parents or prospective new parents who’ve just learned that a child suffers from a rare genetic disorder?

In May, Novartis won FDA approval to market its gene therapy Zolgensma for spinal muscular atrophy (SMA), the leading genetic cause of death in infants. The one-time treatment will cost a record $2.125 million, payable at $425,000 per year over five years, and Wall Street analysts have forecast sales of $2 billion by 2022 (via Reuters).

This is just the beginning.

According to research by MIT, 15 to 30 new gene therapies are expected to launch within the next five years. Besides fixing the genomes of embryos, editing the genome of adults has now also been attempted to fix small but devastating genetic errors. And the pipeline is full. ClinicalTrials.gov lists 432 active studies for gene therapies, not to mention those studies that are recruiting and not yet recruiting for trial.

CONCERNS ABOUT COST SUSTAINABILITY

The questions of how these treatments are going to be covered, who will be paying for them, and how our healthcare system can adapt to support getting these cures to those who desperately need them – are not easy questions – but everyone, including the drug companies, are asking them.

In a recent opinion piece in The Hill, Steve Pociask president of the American Consumer Institute (ACI), attempts to get beyond “salacious” headlines about Zolgensma, suggesting that the current debate about upfront costs for gene therapies fails to account for the high cost of chronic care our system already supports.

Keeping in mind the source (ACI purports to represent consumer interests but is funded by the corporations that rely on their trust), he has a point: “gene therapies certainly are in many cases more affordable when weighed against costly, long-term treatments.” With that said, the up-front costs pose a risk to the solvency of even the most robust benefits plan.

Senator Bill Cassidy (R-LA) is a gastroenterologist by trade. Writing in Stat News, he warns, “Although [gene therapies] may actually save money in the long run compared to the health care costs associated with the diseases they treat, those savings might not accrue to the initial payer because patients often change health insurers.”

In sum: “These expensive treatments are entering a market structure that was not built to price them.”

And if Senator Cassidy is telling us that gene therapy may not be affordable for federal and state government budgets, how are self-funded payers expected to handle them?

OUTCOMES-BASED AGREEMENTS AND YOUR BENEFITS PLAN

Bluebird aims to begin selling Zynteglo in the US in 2020, and will likely follow Novartis’ lead, establishing “outcomes-based agreements” with insurers, thereby tying price to performance—in the near term.

As with Zolgensma, the cost of Zynteglo in the EU will be spread over five years based on its continued effectiveness. That’s $350,000 annually.

According to Richard Mark Kirkner, writing for Managed Care Magazine, the outcomes-based deal that saw Harvard Pilgrim become the first health plan to cover Luxterna, “pays Spark full freight only if the drug works after 30 months, with an interim payment made upon a ‘look-in’ period at 30 to 90 days. Spark is also on the hook for rebates if the drug fails.”

“Reality, however utopian, is something from which people feel the need of taking pretty frequent holidays….” ― Aldous Huxley, Brave New World

Discussing the rationale for outcomes-based pricing, Harvard Pilgrim Chief Medical Officer Michael Sherman, MD says, “It isn’t the solution, but it’s part of the solution for managing the drug expense and helping align our spend with the value the drugs create.”

$2.2 million of value? Desperate parents and suffering patients have blank-check expectations when it comes to life-saving therapies. Any glimmer of hope is meaningful, urgent, even if these drugs are unproven. Consider a recent crowdfunding effort that inspired more than 23,000 people to raise more than $2.2 million to help a little girl that very few of them knew to receive Zolgensma. She was approaching her second birthday, after which she would no longer have been eligible for treatment. The campaigns succeeded in just four days.

On the other hand, financial incentives drive business, industry—and innovation. So far, four gene therapies have been pulled off the market, apparently because no one could or would afford them. So there is a world where it makes no commercial sense for drug companies to make and sell these “miracle drugs.”

Payers are stuck in the middle—we want to take care of our people, but we have to be able to do so sustainably. As Express Scripts’ Chief Medical Officer Steve Miller so aptly told Managed Care Magazine, “We on the payer side have got to be just as innovative as the scientists have been on the discovery side.”

The market changes every day. Our data-driven insights can help you save millions, even as we help you prepare your pharmacy benefits plan for the coming wave of expensive gene therapies and million-dollar drugs.

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One of Big Pharma’s Bad Actors Goes Bust

One of Big Pharma’s Bad Actors Goes Bust

With the news that Novum Pharmaceuticals has filed for bankruptcy, Scripta discusses a case study in how bad actors game our pharmacy benefits system.

Novum Pharmaceuticals, Inc. was a bad actor from the very beginning. The company was founded in order to take advantage of the way we deliver pharmacy benefits here in America, and their story offers an object lesson on how profiteering by drugmakers is driving up health care costs.

Novum is a privately-held company based in Chicago. Back in 2015, the company was founded with the stated purpose of (in part) providing patients with reduced out-of-pocket costs for branded therapies. The company had purchased exclusive rights to three drugs that same year. By the fall of 2016, Novum was in trouble.

The company made the news in the wake of senate subcommittee hearings focused on drugmaker Mylan’s manipulation of EpiPen prices. The Financial Times reported that Novum, too, was engaged in price gouging.

Novum had raised the price of the skin gel they had purchased, Alacort, by more than 3,900%.

A second drug, Novacort (a corticosteroid ointment) went from $4,186 to $7,142.

The third, Aloquin, had been available from the previous owner, Primus Pharmaceuticals, for $241.50 a tube. Just eighteen months later, that same drug — which is a combination of two cheaper therapies – was listing for $9,561.

According to reporting at the time, Novum Pharma defended the price increases by claiming that patients would pay nothing or a small amount for their drugs. Of course, that meant insurers (including self-funded employers) would be footing the rest of the bill.

EVERYTHING OLD IS NEW AGAIN

As Dr. Paul S. Bradley notes, it’s not as if Novum was in business to develop breakthrough therapies. There are other, more affordable drugs that effectively treat the same conditions.

Aloquin, to take the most egregious example, combines two cheaper ingredients. The first is a iodoquinol, which has been around for decades. You can buy it over-the-counter (albeit combined with hydrocortisone) for $40 to $50. The other is an extract from the aloe vera plant. Aloe vera cream costs a few dollars.

Novum marketed Aloquin for the treatment of acne, but it is more specifically used to treat eczema and parasitic skin infections. If it worked, it would make sense as an option when hydrocortisone is not appropriate (as the company suggested in its literature). But according to the FDA, Aloquin and Alacort were only “possibly” effective.

To put it another way, there was only ever limited evidence that the drugs were effective, and quite “possibly” some evidence that they were not.

GAMING YOUR PHARMACY BENEFITS PROGRAM

We have warned against coupons and other patient assistance programs before.

As Michael Hiltzik, writing for the LA Times, put it back in 2016, “The drug companies hope that by taking the burden of high prices off the little guy, they can continue to charge full price to payers.”

And so while most patients with private insurance paid nothing for Novum products, and those without insurance never paid more than $35, their health plans were always paying the full, inflated price for a “possibly” effective drug with cheaper alternatives.

High-deductible plans were intended to make us all better consumers. Coupons and other patient assistance programs, which Big Pharma spins as a form of philanthropy, have the opposite effect. It is Big Pharma’s way of undermining your carefully constructed pharmacy benefits program.

Employees are going to take the drugs they are prescribed – especially if they are free – and when it comes to prescribing them, Doctors do not know what drugs cost. Because of the way health care is structured in the United States, even if doctors do make the effort to understand drug prices, there is no way to know what any one patient might be paying for a given drug.

Doctors just want what’s best for their patients, and companies like Novum are relentless. Of the company’s 50 full-time employees, most are sales representatives. They won’t be out of work for long…

A BAD END FOR BAD PHARMA

Back in 2016, Novum spokesman Rand Walton complained of “the current broken system” in defending the company’s business practices. He claimed that the company offered a “creative approach to ensure that physicians and patients are not encumbered.”

Of course, it is payers who bear the burden in the American system.

According to reporting in the Chicago Tribune, Novum’s reasons for declaring bankruptcy include manufacturing challenges, “including one manufacturer that was shuttered by the U.S. Food and Drug Administration and another that couldn’t keep up with manufacturing demand for its products.”

More tellingly, again from the Tribune: “Novum has had a difficult time getting its drugs covered under health insurance plans. Industry middlemen, known as pharmacy benefit managers, have refused to include Novum’s drugs on prescription formularies, he wrote, which means insurance plans often aren’t covering the medications.”

Ironically, once the press alerted the industry to Novum’s price-gouging, rejection rates increased.

Now, just four years since it hung out its shingle, the company is bankrupt and will be selling off the same assets—three medications—that it purchased at its founding.

Good job, everybody.

Don’t let bad pharma’s price-gouging hit your bottom line. Call Scripta. We monitor every transaction, for every employee, every day.

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The Latest on Drug Patent Scams

The Latest on Drug Patent Scams

How Big Pharma’s anti-competitive practices drive up costs for everybody, while at the same time stifling the R & D that high drug prices are supposed to fund.

By now, most Americans understand that generic drugs and other biosimilars are not only safe, but tried-and-true.

About three-quarters of the medications Americans take are generics, and because generic drugs can be as much as 95% cheaper than their branded counterparts, patients can often save hundreds, and sometimes thousands of dollars at the pharmacy counter, just by requesting a change.

It goes without saying that the big pharmaceutical companies do not like the competition that comes from generic clones of their blockbuster drugs. As such, they have established a set of strategies, known collectively as “evergreening” and “thicketing” designed to extend those patents.

The result: from 2005 to 2015, 78% of the drugs associated with new patents in the FDA’s records were not new drugs coming on the market, but existing drugs. And of the roughly 100 best-selling drugs, more than 70% had their protection extended at least once, this according to a study entitled May Your Drug Price be Evergreen published in 2018 in the Oxford Journal of Law and the Biosciences.

Drug Prices Too High | Save with Scripta
MAY YOUR DRUG PRICE BE EVERGREEN

Drug patents in America are good for 20 years. Because that span includes the time it takes for the FDA to approve a given drug for use, a drugmaker generally has 7 to 12 years of exclusivity.

In a call to give the give the US patent office more resources to review and reject spurious patents, the USA Today Editorial Board notes that current patent laws balance two conflicting interests, rewarding drugmakers that develop useful medicines, and getting less expensive generics into the hands of users.

Spurious patents, you say?

“Evergreening” involves making slight changes to existing drugs in order to capitalize on the brand-name’s success. The changes may or may not offer therapeutic benefits to patients — indeed, the change might be simply cosmetic, a change in the color of a pill for instance — but it allows the company to apply for a new patent and new protections.

From May Your Drug Price be Evergreen: “Consider the dementia medication Namenda, a blockbuster drug that was scheduled to lose patent protection in 2015. The company launched a longer-acting version of the original drug product and began encouraging patients and doctors to switch to the patent-protected, longer-acting version in order to undermine generic competition.”

CURRENT PATENT LAWS STIFLE DRUG INNOVATION

This brings us to “thicketing,” and a superb article that we recommend you read in its entirety.

“Thicketing” is the process whereby a drug manufacturer proliferates the patents associated with a given drug. A company might file patents to protect obscure steps in the production and manufacturing process, for instance, or specific adjustments in dosing, or a change to the prescription regimen.

The article, published July 18, 2019 in Fortune, is entitled Protect at All Costs: How the Maker of the World’s Bestselling Drug Keeps Prices Sky-High. Author Cy Mukherjee discusses the many ways that the U.S. patent system not only allows but also incentivizes anti-competitive practices. Indeed, the race to extend patent exclusivity is driving up costs for everybody—patients, government payers, and insurers—while at the same time stifling the R & D that high drug prices are supposed to fund.

The article focuses on Humira, the world’s #1 bestselling drug.

As Mr. Mukherjee puts it, “The story of how Humira became the world’s bestselling drug is a case study of an industry in slow-motion failure—of a corporate model that is increasingly forsaking investing in research and discovery in favor of purchasing it.”

At Scripta, we have seen first hand how this sort of anti-competitive approach to preserving blockbuster profits can cost both employer plans and the patients they insure. Call us today to make sure that your health plan doesn’t fall victim to Big Pharma’s pricing scams.

THE FOREST AND THE TREES
Humira is used to treat a slew of conditions from arthritis to psoriasis to Crohn’s disease and ulcerative colitis. The drug first received FDA approval to market in Dec. 31, 2002. Today, it is the bestselling drug in the world, bringing in nearly $20 billion in global sales last year alone.

That figure represents more than 60% of drugmaker AbbVie’s 2018 revenues, and you would never know it, but their first patent expired in 2016.

Link to Fortune Article about Humira

According to filings related a new lawsuit, filed by large grocery workers’ union in New York, AbbVie applied for and won 75 Humira patents in the three years before its initial patent expired. AbbVie CEO Richard Gonzalez has said the company now holds approximately 136 Humira patents.

From the Fortune article: “That includes more than 30 patents on the ways in which the drug is administered; more than 25 patents on various formulations of the drug; more than 50 patents related to Humira’s manufacturing processes; and about 20 patents on the delivery devices that customers use to take the medicine.”

The result is a challenging environment (to say the least) for would-be makers of a generic equivalent of Humira.

Nine companies have had to fight and settle patent litigation with AbbVie. The three companies that have had biosimilars approved have struck deals to delay production until 2023! That means fewer choices—and higher costs—for consumers who might otherwise pursue cheaper options:

Again, according to Fortune, “The the U.S. list price of the standard 40 mg Humira injectable pen, used in the treatment of rheumatoid arthritis, more than tripled from 2006 to 2017, with the price for a one-year supply soaring from $16,636 to $58,612. That’s a compound annual growth rate of over 12%.”

FALSE CLAIMS COULD YIELD A BIG SETTLEMENT

Ready for some good news?

A new lawsuit is attempting to recoup profits generated by false patent claims. If it succeeds, it could be a huge win for both patients and taxpayers (though the government has yet to join the suit).

We won’t be holding our breath.

Valerie Bauman, writing in Bloomberg Law, today notes that “A patent attorney is using the False Claims Act to sue brand-name drug companies over extending their patent protections, potentially carving a new legal path for stopping big-brand drugmakers from keeping generics off the market.”

At issue, Janssen pharmaceutical’s attempts to extend the life-cycle of Zytiga, an expensive (and profitable) prostate cancer drug. The follow-on patents, which called for administering the original drug with the steroid prednisone, were rejected several times as too obvious to patent, then granted in 2014, and then overturned in 2018, before being finally invalidated in May of 2019.

As Ms. Bauman notes, “Over that multi-year period, Johson & Johnson and Janssen had a monopoly on Zytiga while the issue worked its way through the courts.” Zytiga, for the record, retails for as much as $10,000 a month, producing nearly $3.5 billion in revenue in 2018, according to Johnson & Johnson’s annual report.

At Scripta, we help you stay ahead of drug prices that can change overnight as a result of pricing games and profiteering by Big Pharma. Call us: we monitor every transaction, for every employee, every day.

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How Are Drug Rebates Still a Thing?

How Are Drug Rebates Still a Thing?

A series of policy defeats means that drug rebates will continue to obstruct pricing transparency and, quite possibly, to drive prescription drug price increases.

It was a bad week for transparency.

On Monday, a federal judge said that the Trump administration lacked the legal authority to require drugmakers to disclose their prices in TV ads.

On Thursday, Human Services Secretary Alex Azar (himself a former pharmaceutical executive) announced that the administration will not proceed with a proposal to curb industry rebates, the result of super-secret deals between drugmakers and PBMs.

Both proposals, aimed to tamp down sharply rising drug costs for consumers and the federal government, are effectively dead in the (shark-infested) waters.

Industry Complexity is Part of the Problem
Scripta has long argued that PBM rebates represent of the most nefarious forms of market manipulation affecting the price we pay for necessary medications.

The rebates paid by the drug companies are essentially kickbacks—payment in return for a coveted place on the formulary that determines what drugs are covered under a given plan.

Of course, the PBMs and their representatives argue differently. In a recent Op-Ed published in the Wall Street Journal, Joseph Antos and James C. Capretta, both fellows at the American Enterprise Institute, argued that, “A rule designed to save patients money would end up having the opposite effect. rebates are price discounts, not kickbacks. They reduce prices based on sales volume: Drug companies charge less when more of their drugs are sold to patients.”

But since the deals are shrouded in mystery, who’s to say for sure? The fact remains that for years, drug makers, drug wholesalers, pharmacies, and pharmacy benefit managers (PBMs) have thrived in a complex system that conceals profiteering.

How complex is that system? Read our recent post on the subject of pricing complexity or check out this video explainer from the Wall Street Journal:

So to be clear: under the current system, PBMs negotiate confidential rebates and discounts on many branded prescription drugs. While PBMs claim to pass those rebates on to insurers and thereby to customers (more on that below), because the deals are secret, we don’t know for sure how much they pocket themselves.

What we DO know is that the result is formularies that favor the drugs that Big Pharma wants you to buy, which are not necessarily the most cost-effective drugs and not even necessarily the most effective drug for a given indication.

There’s a LOT of money at stake.

Americans spend $360 billion dollars a year on prescription drugs.

No wonder drugmakers argued that requiring them to disclose list prices in television ads amounted to coercion that would violate their free speech rights under the Constitution. And no doubt the beancounters in their back rooms were cheering the government’s decision not to proceed with a proposal that would force them to disclose the results of these deals.

PBM REBATES ARE NOT WORTH IT
The American Association of Retired Persons (AARP) had said in an April letter that the administration’s rule could lead to higher drug prices. A separate report indicated that the proposal could cost the federal government about $200 billion over a decade.

This, of course, is the same logic that we see in talking to payors, including municipalities and self-insured businesses, who are afraid to risk the pass-through rebates that their PBMs dangle every year. Scripta has shown, however, that in many cases those rebates do not outweigh the potential savings achievable through negotiation and better plan and formulary design.

Give the pharmacy benefit experts at Scripta a call. We don’t mind swimming with sharks.

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Generic Drugmakers Are in Big Trouble

Generic Drugmakers Are in Big Trouble

A major lawsuit accuses generic drug makers of a price-fixing conspiracy and “billions of dollars of damage” to the US economy.

A new lawsuit, joined by 43 states, was filed May 10 in the U.S. District Court in Connecticut. According to Connecticut’s Attorney General William Tong, appearing on CBS’ 60 Minutes, dramatic price increases for some of the industry’s most common drugs between 2013 and 2014 were the result of a massive price-fixing scheme involving some 20 drug makers, including the world’s largest generic drug maker, Teva Pharmaceuticals.

The price increases hit patients with high-deductible corporate insurance plans particularly hard, according to consumer advocates.

As Scripta has often noted between 2010 and 2015, more than 300 generic drugs had at least one price increase of 100% or more. This lawsuit serves as proof once again that generics now require as much (if not more) vigilance from payers as do brand-name drugs. Indeed, payers and patients have long been at the mercy of drug makers, drug wholesalers and, yes, quite possibly your PBM.

Generic substitution is just one step towards a comprehensive pharmacy benefit savings plan. Contact one of Scripta’s savings experts to learn how to protect your company and your employees from price manipulation.

GENERIC DRUG MAKERS: “TOO BIG TO CARE.”
As one might imagine, the market for generic drugs is massive. According to recent research, patients around the world spent over $200 billion on generic drugs in 2015, a market that is expected to reach $380 billion by 2021. In the US alone that market is $100 billion, and the market for generics have grown from less than 20% of total prescriptions to upwards of 90% of prescriptions filled.

Attorney General Tong, during his turn on 60 Minutes, laid out a strong case for collusion in carving up that market. With access to phone records and text messages, his office uncovered a “massive systematic conspiracy to bilk customers out of billions of dollars.” As a result, more than 1200 of the most-prescribed drugs jumped on average 400% in a single year.

According to antitrust investigators, if proven the drug makers’ collusion may constitute one of “the most egregious examples of corporate greed” ever seen. The industry and defendants including Pfizer, whose wholly-owned subsidiary Greenstone, LLC is named in the suit, “vehemently” deny the accusations and will “vigorously” contest the lawsuit.

WHAT DOES COLLUSION LOOK LIKE?
So how did drug makers manufacture the price increases?

Congress established the current generic industry in 1984 to push prices down and foster competition. But according to the lawsuit, sales directors, marketers, and CEO’s alike (and as far back as 1986) participated in a complex price-fixing scheme by “playing nice in the sandbox together.”

Writing in the Hartford Courant, Josh Kovner offers an example: Pravastin, a cholesterol-lowering medication, made $1.3 million under the brand name Pravachol for Bristol Myers Squibb in the year before it came off patent protection and entered the generic market in 2006.

Kovner explains what happened next: “Five companies produced the generic version — Teva, Glenmark, Zydus, Lupin and Apotex… Up until the spring of 2013, a bottle of 10 mg Pravastatin tablets was selling for about $27…. by the end of August 2013, all five companies had raised their prices and had agreed not to undercut one another, even to the point of refusing to offer lower prices when wholesalers came seeking relief… Once the fifth company locked in at the high price, Pravastatin was selling for about $196 per bottle, according to the lawsuit.

“The lawsuit says that the net profits for Teva from the manipulation surpassed $653 million — per quarter.”

PRICE-FIXING AFFECTS ALL OF US
Generic drug prices spiked between 2013 and 2015, and even though they have remained stable ever since, that inflationary moment has affected health insurance premiums and impacted Medicare and Medicaid, driving up the cost of American healthcare.

Mr. Tong noted two additional examples among the 1215 drugs that saw price increases during this period: Doxacyclene, a common antibiotic, the price of which rose 8281% fro $20 to more than $1800 between 2013 and 2014. Nystatin cost just $68 a bottle for years until April 2013, when it doubled in price, with Heritage Pharmaceuticals leading the way for Sun and Teva.

As Ted Doolittle, the state health advocate and a former federal prosecutor, put it, speaking again with the Hartford Courant, “Moving people toward generics had been somewhat effective” in combating the rising cost of health care. “The victims of this fraud,” he says, “are our families, our loved ones, our neighbors.”

Generic substitution is just one step towards a comprehensive pharmacy benefit savings plan. Contact one of Scripta’s savings experts to learn how to protect your company and your employees from price manipulation.

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