December 2, 2014—Two members of Congress who have been investigating rising generic drug prices have introduced legislation that would require generic drugmakers to provide larger Medicaid drug rebates whenever their products’ prices rise faster than the rate of inflation. [ms-protect-content id=”2799″]
However, with just days left in the current session of Congress, the bill has little chance of being enacted. It would have to be reintroduced during the next session, and with Republicans assuming control of the Senate, its odds of passage next year could grow even longer.
Sen. Bernard Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.) unveiled the bill during a Nov. 20 hearing before the Senate Oversight and Government Reform Subcommittee on Primary Health and Aging, which Sen. Sanders chairs. Rep. Cummings is ranking member of the House Oversight Committee.
Under current law, whenever the percent increase in a brand-name drug’s average manufacturer price for the current quarter exceeds the corresponding percent increase in the Consumer Price Index-Urban (CPI-U), the manufacturer must pay an additional Medicaid rebate. Because a drug’s 340B ceiling price is based on its Medicaid unit rebate amount, 340B covered entities are likewise entitled to an additional 340B discount when a drug’s quarterly AMP outpaces the quarterly rate of inflation. Although the Sanders-Cummings bill does not specifically cite 340B, some observers think the inflation penalty extension would apply both to Medicaid rebates and 340B discounts.
This inflation penalty has always applied to brand-name drugs only. Sen. Sanders’ and Rep. Cummings’ bill would “extend the requirement that drug manufacturers that increase prices faster than inflation pay an additional rebate to State Medicaid programs to include manufacturers of generic drugs.” According to testimony presented during the hearing, one-third of generic drugs had price increases in 2013, and all but three of these were greater than inflation.
CMS data made public at the hearing show the price for 1,215 generic drugs increased 448 percent on average from July 2013 to July 2014. During that period, nearly 10 percent of all generic drugs more than doubled in price, according to CMS.
“Drug companies have seen the opportunity to make a whole lot of money and they are seizing that opportunity,” Sen. Sanders said. “This is greed at work in the pharmaceutical industry.”
In his testimony at the Senate hearing, Rep. Cummings said “some companies are exploiting monopolies and disruptions in supply to implement massive price increases in order to reap unconscionable profits.”
The CEOs of three generic drugmakers – Marathon, Lannett, and Teva – declined invitations to testify at the hearing. Sen. Sanders and Rep. Cummings sent letters on Oct. 2 to those firms and 11 others as part of their investigation.
Drug industry consultant Scott Gottlieb said during the hearing that “there is no one discernable feature, or policy shortcoming” that explains why the prices of some generic drugs have risen substantially. “On the contrary, a more pervasive and concerning trend relates to market challenges and policies that are slowly raising overall generic cost of goods,” including regulatory costs, he said.
“The fact is that generic companies lose money on many of their offerings,” Gottlieb said. “These are not public utilities….Firms will take price increase in circumstances where the market will enable profits. This helps offset all of the situations where other circumstances create losses.” [/ms-protect-content]