Generic Drug Price Increases and Medicaid

                                                           Comments due by Oct 2, 2015

Following prodding from Congressional lawmakers, the Office of the Inspector General of the U.S. Department of Health & Human Services says it will conduct a new review of generic drug price increases on the Medicaid drug rebate program.
The agency plans to review price increases between 2005 and 2014 in order to determine the extent to which generic drug prices exceeded the inflation rate, according to a letter the OIG sent to U.S. Sen. Bernie Sanders (I-Vt.) and U.S. Rep. Elijah Cummings (D-Md.).
The move comes amid growing debate over the cost of prescription drugs, and the budgetary strain placed on payers, both private and public. Generally, the issue had been confined to brand-name medicines, but last year, there were reports that prices for some generic drugs were also rising. This came as a surprise, given that generics are traditionally seen as a low-cost alternative for patients.
Last November, the lawmakers held hearings to examine soaring prices for some generic drugs. At the time, they cited data showing prices for generics sold through retail pharmacies increased 37% from the previous quarter and that prices for certain generic drugs had risen over the past year by as much as 1,000% or more. In February, Sanders and Cummings asked OIG to run a review.
“It is unacceptable that Americans pay, by far, the highest prices in the world for prescription drugs. Generic drugs were meant to help make medications affordable for millions of Americans who rely on prescriptions to manage their health needs. We’ve got to get to the bottom of these enormous price increases,” Sanders says in a statement. “It is outrageous that skyrocketing prices of generic drugs are preventing patients from getting the medications they need,” says Cummings in the statement.
As part of their investigation, Sanders and Cummings had asked 14 generic drug makers to provide pricing data, but the companies did not do so. As a result, the lawmakers turned to the OIG, since federal law requires drug makers to provide price data to HHS. A congressional aide says the investigation is still under way.
The lawmakers, meanwhile, have also introduced identical bills in the House and Senate that would require generic drug makers to pay additional rebates to state Medicaid programs for any medicine that increases in price faster than the inflation rate. Under current law, brand-name drug makers are required to pay an additional rebate to Medicaid, but generic drug makers are not required to do so.
The lawmakers want that same rebate provision to cover generic drugs as well. They cite an estimate from the Congressional Budget Office that such a change would save taxpayers $500 million over 10 years. In its letter, the OIG says it will examine the extent to which Medicaid would have received additional rebates for any drug prices that exceeded inflation rates.
Several reasons have been cited for price increases for generic drugs. These include manufacturing problems that prompted some companies to discontinue production, making it possible for rivals to boost prices. We asked the trade group for generic drug makers for a response and will update you accordingly.
At the time of the hearings last fall, the Generic Pharmaceutical Association argued that the lawmakers relied, in part, on numbers with “limited usefulness in drawing conclusions about the costs to government purchasers.” That’s because the lawmakers cited retail pharmacy costs, which the trade group maintained did not reflect costs negotiated by government health care programs.
It is not clear when the OIG review will be completed, though. An OIG spokeswoman writes us that a start date has not yet been set.