A once-promised truth in pharmaceutical benefits management is unravelling, leaving payers exposed and researchers scratching their heads.
Half of all retail generic drugs have become more expensive over the past 12 months, with 11 doubling in prices, according to a report by Pembroke Consulting.
"Retail generic drugs usually get cheaper over time," writes Pembroke president Adam Fein, who combed through Average Drug Acquisition Cost data on 2,376 generic drugs.
"By contrast, our analysis showed that the median price change was 0 percent"--that half increased in cost and half declined.
The median increase from summer 2013 to summer 2014 among the rising half was 11.8 percent, largely outweighing the decreases of the other half. Nearly 10 percent of that half increased by more than 100 percent, and some shot up exponentially, according to Fein's analysis.
A 500-milligram dose of the 60-year-old antibiotic tetracycline increased some 17,900 percent, from 5 cents in 2013 to $8.59 this year. For 250-mg doses, prices increased more moderately, though still significantly by about 7,000 percent, to $4.26 a dose.
Among other generic prices shooting up in price, the hypertension and heart failure drug captopril increased from 6 cents per 100 mg to $2.04, up more than 3,500 percent. The antidepressant clomipramine increased by more than 1,800 percent per 75 mg dose, from 42 cents to $8.15, and the anti-fungal fluconazole increased by just under 1,000 percent, from 14 cents to $1.50 over a year.
Part of the price spikes have been blamed on national shortages, particularly for tetracycline, along with other antibiotics and even basic medicines like saline. In the case of tetracycline, one manufacturer, Watson, stopped production in October 2013 for reasons that are not clear, and another, Teva, has cited raw material shortfalls, although the Food and Drug Administration recently classified the shortage as resolved.
While half of all retail generics increased in price, another half did see decreases--although by modest amounts. Among the half of generics that fell in price, there was a median decline of -6 percent and about 16 percent of all the drugs seeing prices fall by more than 10 percent, according to the report.
Fein, who also heads the Drug Channels Institute through his Philadelphia-based consultancy, warns of a harsh market to come for generic retail drugs--even as the ranks of the insured grows, along with the incidence of chronic conditions that can be treated with generics.
"A few years ago, we all worried about generic injectable drug shortages. Most products had two or fewer suppliers," Fein writes. "It's hard to believe, but the retail generic supply chain is headed in the same direction."
Individual consumers who need the generics stand to be "the biggest losers" from the trends, Fein writes. "They will see higher out-of-pocket costs," he predicts, and "inflation may even cause widespread use of multiple generic tiers." Even with additional cost sharing for members, payers may share in the financial hits, especially if they alienate consumers from pharmacy benefit plans.
It's also possible the prices are part of a cycle that will become more reasonable over time, Fein argues. Drug makers "will be less likely to exit more-profitable generic markets," he writes. "Higher prices will encourage more companies to produce generic drugs in short supply, which will reverse the recent growth of older brand-name drugs."