Generic price hikes expected to continue
The dramatic increase in the price of generic drugs last year is expected to continue for the rest of 2015 and even into next year, according to those who closely monitor the market.
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Financial analysts and other industry watchers stress that the rate of inflation and the number of price hikes will likely be slightly below the nearly 400 increases in 2014 that resulted in overall costs rising more than 6%. A Morgan Stanley report released in January put the generic inflation rate at between 5% and 6% for the next 12 months to 18 months.
The same issues that led to last year’s spike in prices — increased demand, short-term market exclusivity for some new single-source generics and higher manufacturing and raw materials costs — have not gone away, industry watchers said. In addition, increased regulatory obstacles, supplier consolidation and the increasing complexity of generic drug production also are expected to drive up prices going forward.
Some said they expect the ongoing generics inflation could lead retail pharmacies to rethink the way they market these products. A report earlier this year by The Lockton Benefit Group, a provider of employee benefits to companies around the world, predicted that some of the highest-priced generics will begin to disappear from community pharmacies’ low-cost drug lists.
“Some PBMs are even recommending moving certain generics into a higher co-pay tier,” the report said.
While the spike in the price of generics has provided many pharmacies with higher top-line growth, it also has driven down bottom-line profitability and led consumers and plan payers to shy away from some generics.
“Overall increases in the amounts we pay to procure generic drugs … could have a significant adverse effect on our profitability,” a spokesman for Walgreens Boots Alliance said. “In addition, our gross profit margins would be adversely affected by continued generic inflation to the extent we are not able to offset such cost increases.”
Like other community pharmacies across the country, Walgreens said it is hoping to combat the price hikes through changes in its procurement procedures and revamped contracts with suppliers and payers.
Making an impact
Advocacy for the community pharmacy industry and the advancement of the profession is a big part of the job at Drug Store News. That said, this has been a busy month even by our standards.
In March, DSN published the fourth edition of RxImpact, a special stand-alone report that we produce to help educate lawmakers about the ever-expanding role community pharmacy plays in our nation’s healthcare system. The issues are stuffed into kits that National Association of Chain Drug Store members leave behind with members of Congress, during desk-side meetings that are organized by NACDS. In addition, DSN ensures that every member of the Senate and the House of Representatives — as well as key House staffers — is hand-delivered a copy of RxImpact.
Why? We want them to understand your story.
If you missed RxImpact, the digital version is available at www.drugstorenews.com/rx-impact-march-2015. When a reporter or a politician, or anyone, wants to know more about what community pharmacy can do — and is doing — to improve affordability and access to health care, give them a copy.
But RxImpact is not the only thing DSN does by way of advocacy work. It is an ongoing fight to tell the story of community pharmacy to people outside of the industry, who, nonetheless make decisions everyday that dramatically impact your business.
Sometimes these issues are about patient rights. Like the work DSN has done to help raise awareness among lawmakers and the news media about the other side of the prescription drug abuse story in America — the problem created by new DEA regulations that make it difficult for honest patients battling chronic pain to access the medications they need to live their lives.
To help set the record straight here, DSN sent an op-ed to The Hill, which it published April 14 (http://thehill.com/blogs/congress-blog/ healthcare/238656-complex-pain-med-prob-lems-demand-holistic-coverage-action). In it, I argue for the passage of the Ensuring Patient Access and Effective Drug Enforcement Act (S. 483/H.R. 471), which would create a seat at the table for community pharmacy and other important stakeholders with drug enforcement and health agencies to create a better solution than the current DEA regulations.
Our work here didn’t just begin overnight. A year ago, DSN created a special microsite at www.drugstorenews.com/pain-management to help give a face to the honest patients who had become victims of flawed policy.
Advocacy — telling your story — is a big part of the job at DSN. And it’s a job we take very seriously.