Complex generics will boost speciality biz, Teva says

Complex generics will boost speciality biz, Teva says

By Dan Stanton+, 16-Jan-2014

Complex generics will represent over 50% of Teva’s generic market by 2017, the firm says, but investments in delivery technology will have positive implications across the full business.

Prices soar for some generic drugs

Prices soar for some generic drugs

Victoria Colliver – Updated 12:13 pm, Wednesday, January 1, 2014 –

The widespread use of generic medications is supposed to save the health care system money, but huge price spikes in certain common, previously low-cost drugs is putting some of that savings in question.

Nosebleed-level price increases of more than 100 percent, 1,000 percent and, in some cases, 6,000 percent and above are making it difficult for pharmacists to fill some prescriptions because insurance companies have been slow to adjust their reimbursements to reflect the price spikes. Large chain pharmacies have felt the pinch, but it’s been especially hard on independent pharmacists.

“I had to turn away several patients for some pain medications,” said Benson Toy, a pharmacist at Marin Medical Pharmacy in San Rafael. He directed them to Costco, CVS and other retailers that can more easily absorb the costs.

Nearly 80 percent of all the drugs dispensed in the United States are generics, which are required to have the same active ingredients as the original brand-name versions, but are usually sold at reduced prices without patent protection. Generic drugs save consumers $8 billion to $10 billion a year, according to estimates from the Congressional Budget Office.

But pharmacists, patients and other health experts are alarmed by the cost hikes in generic drugs they’ve seen over the past year, and the acceleration in the number of drugs affected in recent months.

At Toy’s pharmacy, the cost of a bottle of the generic heart medication digoxin shot up from $131 in September to $989 a month later for the same dosage. He said tetracycline, an antibiotic used to treat bacterial infections, rose from $31 for a specific dosage to $450 over the past year.

No explanation for cost

In some cases, the increases can be explained by a manufacturing problem that puts the drug in short supply or a shortage of a key raw material used to make the medication. But in many of the cases, observers say, the extreme jump in price comes without an explanation and seems to make no sense.

Dr. David Belk, an Alameda internist who hosts a website called the True Cost of Healthcare, said he’s noticed that some generics will experience a price hike in a specific dosage of a drug, while the same drug at a different strength will stay the same. In other cases, he said, prices will shoot up and then drop in a short period of time.

For example, Belk said, irbesartan, a blood pressure drug, cost about 15 cents a pill in October. But when he checked the price of the 150-milligram dosage about a month later, it had shot up to about $3 a pill while the 300-mg and 75-mg dosages remained unchanged. He said he’s seen the price of levothyroxine, used to treat an underactive thyroid, fluctuate wildly.

“It’s sort of just a sucker punch,” Belk said. “You sell a few at a really high price for a few weeks, and then that just disappears.”

The Generic Pharmaceutical Association, which represents the generic drug manufacturers but has no role in setting prices, would not respond directly to questions about the spiraling prices of these drugs.

“As with many manufactured products, pricing reflects supply and demand,” said Ralph Neas, the association’s president and chief executive office, in a statement. “But, unlike for many other types of products, generic drug manufacturers cannot simply ramp up production immediately.”

Generics save billions

The pharmaceutical industry group released a study last month that showed use of generic medicines saved the U.S. health system $217 billion in 2012 and about $1.2 trillion from 2003 to 2012.

A new study by Philadelphia research firm Pembroke Consulting found that only about a third of generic drugs have gone up in price between November 2012 and November 2013, and most went up less than 25 percent in that period. But a small percentage saw huge price increases – in the 6,000 percent range, the study said.

Adam Fein, president of Pembroke Consulting, said why prices are jumping that much remains a mystery.

“I’ve talked to a lot of pharmacists and wholesalers and asked them about this, but have not been able to nail down a single cause,” he said. “We do have a more fragile supply chain for a lot of generic drugs.”

That means some generic drugs have such low profit margins that only one or two manufacturers produce the medication, he said. So if there’s a regulatory issue, a problem in production or a lack of raw materials, the price shoots up due to the laws of supply and demand.

A survey released in December by the National Community Pharmacists Association showed that 77 percent of pharmacists saw an upswing in generic drug prices 26 or more times over the previous six months.

“It’s really crazy. It seems to be growing as far as the number of drugs impacted,” said Kevin Schweers, spokesman for the community pharmacists’ group.

The most common generic increases reported in the survey were benazepril for high blood pressure; the antidepressant clomipramine; digoxin to control heart rate; divalproex for seizures and psychiatric conditions; the antibiotic doxycycline; budesonide for asthma; haloperidol for psychotic disorders; and levothyroxine, which is used to treat hypothyroidism.

Consumer impacts

Most people with health coverage are shielded from the cost increases because their co-payments are set contractually. But that’s not the case for people who have to pay cash.

Patients are also affected if they are sent to an unfamiliar pharmacy because their regular pharmacist can’t afford to fill the prescription.

Nina Murphy, of San Rafael, had been picking up a generic painkiller at Marin Medical Pharmacy for the past four years. So she was shocked when she learned in October that her pharmacist could no longer fill the prescription.

“It went up way more than just double,” said Murphy, 62, who declined to reveal the medications she takes. “Now I have to go to a big chain to get the pills.”

Murphy has chronic pain due to multiple car accidents and said going to different pharmacies is physically difficult for her.

“It’s a horrible thing that’s happening to the industry,” she said. “They’re not thinking about the inconvenience that this is causing to the patients.”

Generic drug prices skyrocket

The following are some of the highest reported price increases for generic drugs from November 2012 to November 2013 based on National Average Drug Acquisition Cost data released by the U.S. Centers for Medicare & Medicaid Services.

Drug Use Dosage Price increase
Doxycycline hyclate Antibiotic for bacterial infections 100 mg tablet 6,351%
Morgidox Antibiotic for bacterial infections 100 mg capsule 6,000
Clomipramine Antidepressant 25 mg capsule 3,497
Albuterol sulfate Asthma and other breathing problems 2 mg tablet 3,452
Captopril High blood pressure 12.5 mg tablet 2,714

Source: Pembroke Consulting

Victoria Colliver is a San Francisco Chronicle staff writer. E-mail: Twitter: @vcolliver

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The Centers for Medicare and Medicaid Services have allowed Preferred Networks to Exclude Independent, Retail Pharmacies from Medicare Part D

Plan Sponsors have done their best since 2006 to leave the independent, retail pharmacy out of Medicare Advantage and Standalone Part D preferred networks. The federal government (CMS), plan sponsors, PBMs & PSAOs are all responsible for this inequity.  In fact, our federal legislators represented big money in enacting Part D laws and intentionally left the independent retail pharmacy out of the equation.  A level playing field must exist in order for the Affordable Care Act to be successful. The level playing field law, as reflected below, is inadequate and must be written to reflect the value provided by the independent, retail pharmacy, whether that be in Medicaid or Medicare. (1), (2)

Preferred networks have never provided the retail, independent pharmacy a level playing field. The actually legislation demands that inequality exist in Medicaid and Medicare. At no time has any representative of the retail independent pharmacy done the right thing. They have and will continue to take advantage of this situation.

Level Playing Field for Independent Retail Pharmacies in Medicare Part D

  • Plan Sponsors that include mail-order pharmacies, must allow members to obtain covered drugs from a network retail pharmacy

Plan Sponsor may hold member responsible for higher cost-sharing for obtaining covered drugs from network retail rather than network mail-order pharmacy.

Higher cost-sharing is limited to the mail-order cost-sharing plus any differential in contracted rates between retail and mail-order

  • Plan Sponsors must ensure that the availability of benefits at retail rather than mail-order pharmacies does not increase costs to the government.

  • Member cost-sharing for an extended-day supply at retail must never exceed what the enrollee would have paid at the same retail pharmacy had the enrollee had prescription filled in multiple 1 month supply increments at retail pharmacy rates

  • Plan Sponsors that offer extended supplies must make an “Extended Supply Addendum” available to retail pharmacies on request.

Network mail-order pharmacy rate – addendum allows retail pharmacy to offer extended supplies at same negotiated price, reimbursement rate (including dispensing fee) and cost-sharing as network mail-order pharmacy or pharmacies.

Alternative retail/mail-order pharmacy rate – addendum allows retail pharmacy to dispense at higher than mail-order contracted reimbursement rate.

  • Cost-differential may be passed on to enrollees. Plan Sponsors offering benefits, including extended-day supplies, at network mail order pharmacies must offer retail pharmacies reasonable opportunity to provide those same benefits.

Plan Sponsor must contract with a sufficient number of network retail pharmacies to ensure that enrollees have reasonable access to the same extended day supply benefits at retail that are available at mail-order.

CMS will monitor compliance through, for example, enrollee complaints.

  • Clarification 2012– Plan Sponsor that offers enhanced alternative coverage that includes coverage in the gap may not limit access to covered drugs in the coverage gap to mail-order pharmacies.

Gap coverage must be available to enrollees at all network pharmacies.

Please refer to:

  1. Department of Health & Human Services Review of Part D. Contracting, July 29, 2008 from Daniel Levinson, Inspector General.

  2. Billy Tauzin: Case Study in Corruption, How Industry Money and Personal Interest Shaped Part D, May 2006

Changes in Medicaid Reimbursement: Implications for Generic Manufacturers and Pharmacies

According to the most recent data, the Medicaid program pays for the prescription drugs of approximately 44 million Medicaid fee-for-service patients. By the second quarter of 2010, Medicaid had paid for more than 266 million prescriptions, with these prescription drug costs totaling about $20 billion dollars. Medicaid is expected to expand in 2014 as a result of the new health care reform law. About 16 million more people, primarily adults, are expected to be added to the program, significantly increasing the number of prescriptions paid for by Medicaid. This will have an impact on generic drug manufacturers as well as pharmacies. Thus, Medicaid pharmacy reimbursement policies are critical to pharmacies, wholesalers, and generic-drug manufacturers.

Generic Use Helps Medicaid Save Billions

The Medicaid program—at both the federal and the state level—can save billions of dollars by increasing the use of high-quality, low-cost generic medications. As the Congress and state lawmakers debate ways to improve the Medicaid program, lawmakers should consider policies to promote the use of cost-saving generic medications. 

  • About 69% of all Medicaid prescriptions are dispensed with generic medications, but those prescriptions represent only about 20% of total Medicaid drug-program spending. The remaining 31% dispensed with higher-cost brands make up 80% of Medicaid drug-program spending
  • The average brand prescription costs Medicaid about $200, which is 10 times more than the average generic prescription cost of $20 If generic medication use was increased by just 1%, Medicaid would save $682 million in one year. If generic use was increased by 5%, $3.4 billion would be saved
  • Many states have Medicaid generic dispensing rates that are less than the national average of 69%. If states increased these rates just to the national average, the states and the federal government would save hundreds of millions of dollars.

Reimbursement policies are a key driver in determining generic dispensing rates. Lower generic-drug reimbursement may reduce incentives for pharmacies to dispense generics.

Currently, most states still base reimbursement to pharmacies for brand-name drugs on the average wholesale price (AWP) or the wholesale acquisition cost (WAC), while generic reimbursement is based on federal upper limits (FULs), which are set by the Centers for Medicare and Medicaid Services (CMS) or state-based maximum allowable costs (MACs), which are usually lower than the FULs. States can apply their MACs to more drugs than just those with FULs. States also pay a dispensing fee for each prescription, although the fees are usually lower than pharmacies’ actual cost of dispensing, which remains in the range of about $11 per prescription. 

Some states, such as Alabama and Oregon, have moved to a reimbursement system based on actual acquisition cost (AAC) for drug product reimbursement. The AAC amounts are determined based on surveys of pharmacy purchasing invoices. The dispensing fees in these situations are usually higher than average, approximating the pharmacy’s cost of dispensing, because there is no “margin” for the pharmacy on acquisition cost–based reimbursement. For example, in Oregon the pharmacy dispensing fee is tiered but averages $10.65, while in Alabama it averages $10.64 per prescription. 

More changes are in store for Medicaid pharmacy reimbursement. The new Patient Protection and Affordable Care Act (PPACA) of 2010 included changes to Medicaid reimbursement policies that were originally enacted in the Deficit Reduction Act (DRA) of 2005. The 2005 law moved Medicaid pharmacy reimbursement—specifically the setting of the FULs—to an average manufacturer price (AMP)–based reimbursement system for generic medications. Previously, FULs were based on the AWP or WAC, which policy makers believed did not reflect pharmacies’ costs of purchasing these drugs. These 2005 changes were never implemented, however, because of a court injunction that has since been lifted, but it is likely that AMP-based reimbursement will be coming soon to Medicaid programs.

What Is AMP?

AMP was originally created in a federal law known as OBRA 90 (Omnibus Budget Reconciliation Act of 1990) as a benchmark for manufacturers to determine the basis of rebates that they would have to pay to states for drugs dispensed to Medicaid patients. The rebate program, still in effect today, is supposed to reduce the cost of drugs for Medicaid programs. Quarterly rebates are paid by brand and generic companies based on their utilization in the state Medicaid program, although brand drugs pay a higher amount than generic drugs. 

AMP did not exist before 1990. It was created because it was generally recognized that the AWP was not really a transaction price, and that it would be unfair to base manufacturer rebates to states on a price that did not accurately reflect market transactions and the actual revenues received by manufacturers. 

AMP was supposed to reflect prices paid by retail community pharmacies for prescription drugs, because almost all Medicaid drugs are provided through such pharmacies. Thus, manufacturers would pay back a percentage of the revenues they actually received on sales of drugs to Medicaid through community retail pharmacies. 

Even though the law mandated changes in Medicaid pharmacy reimbursement in 2005, CMS never published a final regulatory definition of AMP until 2007. Under the 2005 law, reimbursement for a particular multiple-source drug, as reflected by the FULs, was to be changed from 150% of the lowest published price (WAC or AWP) to 250% of the lowest AMP.This change was expected to reduce pharmacy reimbursement by billions of dollars, creating concerns among the pharmacy community that many pharmacies with a significant number of Medicaid patients, such as small pharmacies in urban and rural areas, would be hardest hit by these reductions. 

In fact, various government reports after the 2005 law was enacted suggested that this new benchmark would not cover pharmacies costs of purchasing generic drugs. Making matters worse, states could even further reduce the FULs for reimbursement purposes. This fact exacerbated concerns among the pharmacy supply chain that generic-drug reimbursement would be squeezed down hard, with the result that generic-drug dispensing would be reduced. 

In fact, two Government Accountability Office (GAO) studies found that use of 250% of the lowest published AMP to set FULs would have underpaid pharmacies by 36%. The AMP-based reimbursements could have averaged about 78% below what pharmacies were getting paid. An economic analysis of this Medicaid FUL reimbursement policy found that 11,000 pharmacies would have closed had the policy been implemented. That means about 20% of all pharmacies could have closed. Such an outcome could have devastated the community pharmacy infrastructure that is relied on by millions of Medicaid, Medicare, and other patients every day to obtain their pharmacy services. 

Community pharmacy believed that the July 2007 CMS regulation implementing the 2005 changes had several flaws that did not follow the intent of Congress. The National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) filed suit in federal court against CMS and won an injunction in December 2007, staying certain parts of the regulation relating to pharmacy reimbursement and the public posting of AMP data.

According to the retail pharmacies, the AMP definition finalized in 2007 did not reflect the statutory intent of Congress that the AMP should only include retail pharmacy prices. To their consternation, CMS required manufacturers to include in the AMP any price for a drug dispensed in an outpatient setting, including hospitals, mail order, pharmacy benefit managers (PBMs), physician offices, and others. 

Pharmacies believed that this would result in an AMP that would not reflect their costs of purchasing—especially for brands—and they won an injunction on the regulation. As of December 15, 2010, the NCPA and NACDS reached an agreement with CMS to dismiss the Medicaid AMP lawsuit. This was made possible by CMS’s withdrawal of the last remaining provisions of the AMP rule that had been blocked by a preliminary injunction following the litigation. This injunction has helped to avert billions of dollars in Medicaid generic-drug reimbursement reductions to community pharmacies.