Greed, lack of competition increase cost of generics

medicineDEAR DOCTOR K: A generic drug that I’ve been taking for years suddenly became much more expensive. I can’t afford the new price. What can I do?

DEAR READER: Prices of generic versions of some commonly prescribed drugs have been sky rocketing. Like you, many of my patients have been affected.

I spoke to Dr. Ameet Sarpatwari, an instructor at Harvard Medical School and an epidemiologist at Harvard-affiliated Brigham and Women’s Hospital. He noted that, fortunately, the price of most generic drugs remained constant between 2008 and 2015. However, almost 400 generic drugs saw whopping price increases of more than 1,000 percent.

Why are some generic drugs so expensive? It’s not for the same reason that some new drugs are very expensive. With new drugs, the pharmaceutical company has had to spend a great deal of money to develop a drug that didn’t exist before. So there is a rationale for the high price.

But a generic drug was developed long ago, typically by another company and at that company’s expense. So what other reasons might explain the remarkable rise in the price of some generic drugs?

One good reason is that it can be difficult and expensive for a manufacturer to get a generic drug to market. In 2014, it took the Food and Drug Adminis- tration (FDA) an average of 42 months to process a generic drug application. Compare that to an average of eight months for a standard new drug application.

Then, there are several bad reasons:

  • The market for some generic drugs is so small that just one company makes a drug. Without competition, that company has less restraint on the price it charges. A drug for the parasitic Infection called toxoplasmosis used to be made by GlaxoSmith Kline, which priced it modestly. Last August, however, Turing Pharmaceuticals acquired rights to the drug. It then exploited its monopoly, raising the price 5,000 percent (from $13.50 to $750 a pill). Is “rapacious” too strong a word?
  • There is an ongoing wave of market consolidation within the pharmaceutical industry. When two companies make a generic drug, and one company acquires the other, you now have only one company selling the drug.
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