The prices of some generic drugs have soared more than 1,000% in the last year, and federal officials are demanding that generic drug makers explain why, or potentially face new regulation.

Elisabeth Rosenthal, a writer for the New York Times recently wrote a story on the subject…..

The increased use of generic drugs has been one of the rare success stories in national efforts to curb the nation’s 2.8 trillion medical bill, since generics have historically been far cheaper than name-brand versions. More than 8 in 10 prescriptions are filled with generic drugs, according to the FDA. In the 10-year period from the beginning of 2003 through 2012, generic drug use has generated more than $1.2 trillion in savings, according to the Generic Pharmaceutical Association.

But prices of some generic drugs have risen sharply recently, prompting the new congressional investigation, led by Representative Elijah E. Cummings and Senator Bernard Sanders.

“The first thing we need to understand is why these drug companies are raising their prices so dramatically in such a short period of time, which is why we asked for information about the costs to produce these drugs compared to the prices they are now charging,” Representative Cummings said this week. “Once we receive this information, we will be in a better position to evaluate the root causes of these massive increases and, if necessary, consider reforms.”

In a statement, Ralph G. Neas, president and chief executive of the Generic Pharmaceutical Association, said that facts about generic drug prices had been “mischaracterized,” focusing on a handful of drugs with big price increases, among the thousands of “safe, affordable” generic medicines.

Generic drug prices are generally lower than name-brand drugs because manufacturers are competing to sell medicines that are essentially interchangeable. But studies have shown that for competition to bring prices down significantly, 4 or 5 companies usually need to be making a drug.

Drug prices can rise for several reasons related to normal shifts in supply. Companies can leave the market, resulting in decreased supply and less competition. A factory producing the drug may be temporarily closed for violations. But there has been increasing concern that, in some cases, prices rise because of questionable business practices or market manipulation. In the last several years, the Federal Trade Commission and state attorneys general have taken aim at a practice called “pay for delay,” in which brand manufacturers pay generic drug makers to hold off entering the market.

This summer, after a New York Times article about increases in the price of generic digoxin, the Connecticut attorney general issued a subpoena to Lannett, a Philadelphia-based company that is a major distributor of the drug, to assess whether it was engaging in “fixing, maintaining or controlling prices of digoxin” in violation of antitrust law.

In September, the company said its internal review concluded that it had “acted in compliance with applicable laws and regulations with regard to the pricing.”

The attorney general’s office said the investigation was continuing.    10/7/14


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