Price hikes, restrictions threaten generics’ status
Once viewed as the best 35 bargain in the healthcare system, generic drugs may be on the verge of losing that status.
Rapidly rising prices for many generics, regulations that could restrict patients’ access to these medications, a Food and Drug Administration backlog in getting new drugs approved and market consolidation that is reducing competition are all making some wonder how much longer generics will continue to be affordable.
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“Compared to the funds spent on doctors and hospitals, prescription drug therapy is 0cheap,” National Center for Policy Analysis senior fellow Devon Herrick wrote in a report issued in October that examines why generics prices have continued to skyrocket over the past few years. “However, the prices of many generic drugs have increased significantly recently — often for no apparent reason.”
According to IMS Health, generics account for 88% of all prescriptions filled in the United States, but make up only 28% of the nation’s drug spending. The report noted that spending on generics increased 5.3% over the past year, and the total number of prescriptions filled with generics went up 3.2%.
Proponents of these medications argued that while some generics have seen sharp price increases, the drugs continue to be at the heart of the nation’s effort to rein in healthcare spending.
“Generic medicines are a critical part of systemwide efforts to hold down healthcare costs,” Generic Pharmaceutical Association president and CEO Chip Davis said in the wake of public outcry after drug maker Turing Pharmaceuticals raised the price of its Daraprim (pyrimethamine), a drug that is used by only about 2,000 people worldwide, by 5,000% in a single day.
The price hike — which saw the price of Daraprim go from $13.50 a tablet to $750 per pill — is indicative of what NCPA’s Herrick and others see as a result of the FDA being overwhelmed with new drug applications. Currently, he said, the agency has a backlog of 4,000 generic drug applications.
Too often, Herrick noted, the slow process of getting a new generic approved results in one company being the sole supplier of that drug, creating a de facto monopoly and leaving the company free to charge whatever it wants for its medication.
Critics of the FDA said that another of the agency’s policies also is contributing to the recent price hikes.
Many of the thousands of generic drugs that predate the FDA’s approval process required under the 1938 Food, Drug and Cosmetics Act were grandfathered but never officially approved, they noted. The agency is asking that these drugs now undergo the same rigorous clinical studies as newer medications.
Companies that do the tests will receive licenses that can temporarily give them monopoly-pricing power as most rivals are eased or kicked off the market.
“The process of forcing old generic drugs off the market invariably results in higher prices for the newly approved versions compared with their generic versions — something the FDA acknowledges,” Herrick said in his report.
Meanwhile, raw material shortages and production problems that have caused some suppliers’ facilities to fall out of compliance with good manufacturing practices have led to drug shortages and driven up prices on some generics. For instance, in 2013 a shortage of the raw materials used to make the antibiotic doxycycline led some manufacturers to stop producing it. With fewer suppliers offering the product, the cost of doxycycline has soared during the past two years.
The dramatic rise in generics prices has caught the attention of federal regulators and members of Congress. Sen. Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.) held hearings last fall on generic price increases. At those hearings, the lawmakers cited doxycycline as a prime example of the price inflation that is impacting generic drug costs. In the six months between October 2013 and April 2014, they said, the price of a bottle of doxycycline went from $20 to $1,849.
Meanwhile, a federal grand jury in Philadelphia has reportedly begun looking into what is driving the rapid escalation in the price of generics. According to the Philadelphia Inquirer, two generic drugmakers — Lannett and Allergan (formerly Actavis) — have acknowledged receiving subpoenas to testify before the panel.
A higher vision for Rite Aid pharmacy
Health care is transforming, fundamentally and forever. And pharmacy has to change with it. Recognition of that reality has made Rite Aid’s now-former pharmacy leader one of the industry’s leading advocates for a new and broader role for pharmacists.
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Over the past decade, Robert Thompson has championed a higher level of practice for the company’s more than 11,000 pharmacists, driving the adoption of new, pharmacy-based clinical and preventive-health initiatives at Rite Aid, while recognizing that prescription dispensing today remains a critical piece in terms of revenue generation for any drug store retailer.
“We completely believe that ultimately pharmacists, like other providers in the healthcare system, will be paid based on their ability to drive outcomes,” Thompson told Drug Store News. “We believe that ultimately that’s the direction our industry and profession is going to go, and we’re already seeing it come to fruition in certain areas. So for the last several years, we’ve adopted the mantra, ‘No outcome means no income.’ We’ve kind of shouted that message from the rooftops to get people to understand that the business model of pharmacy today is going to change.”
To that end, Thompson said, “we’ve worked very hard to prepare our pharmacists, and we will continue to do that so they will be the best-in-class at driving clinical performance. That’s a tall order for everyone involved, but we certainly believe we can do that. Our goal is to have our pharmacists working to help drive those outcomes.”
The company, he added, is working “to enable our pharmacists to be able to deliver expanded services to their patients” in two basic categories.
“One is prevention, including the immunization program and the information pharmacists can so readily provide to help patients do the right thing to prevent illness or understand how to get well faster, and stay healthier longer,” said Thompson. “The second is all about compliance and adherence … ensuring that the therapy is appropriate, that the patient understands the necessity of the therapy and that the patient will maintain their therapy. So that if they’re suffering from an illness they get well sooner, hopefully stay well longer, and as it relates to chronically ill patients, that they prevent hospital readmissions or more complications due to the complexity of their diseases.”
Thompson said the company’s pharmacy team recognizes the challenges associated with transitioning the current pharmacy model to a reimbursement system that’s based more on successful patient outcomes, while maintaining the massive revenue stream generated by high volumes of prescription dispensing. “There’s still a lot of work to do, because pharmacists still spend the majority of their time in dispensing activities, and they have to balance their time between dispensing and being able to spend quality time with the patients who need them the most,” he acknowledged. “We as pharmacy leaders have to create the systems, the processes, the technology and the support to enable our pharmacists to do that, and we’ve been working on that as well.”
“Ultimately, we believe the payment model is going to change, and we know it needs to change to reflect the pharmacist’s value in the overall healthcare system,” he said. “That’s where it needs to go, that’s what we want to see happen, and we’ve been working very hard to try to do that and be prepared for the future. Our pharmacy leaders and our team have done a great job in driving this message, and we’re working very hard every day to bring it to fruition.”
Rx roots and the Revco years
When he came to Rite Aid in 2004, Thompson brought his own flair for reinvention and entrepreneurialism, shaped by a multifaceted career in both small- and large-chain retail pharmacy and in start-up companies dealing in other sectors of health and wellness.
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Thompson began his career while still in high school, working for Dunaway Drugs, a family-owned chain of more than a dozen stores in suburban Atlanta, “from the age of 16 and throughout my college career in the summers and during holidays” while attending the University of Georgia. After graduation, he worked for an independent pharmacy before joining Revco D.S. in 1978, first as a store pharmacist in Atlanta, and later as a store, district and regional manager. He moved to Revco’s headquarters in Twinsburg, Ohio, in 1988, taking on management roles including director of store operations. From 1995 until the company’s sale to CVS in 1997, he served as VP of pharmacy operations.
“It was a great foundation,” said Thompson. “Revco was an excellent company.”
“Not unlike Rite Aid, Revco went through some very difficult times,” he told DSN. “We fought our way through and out of Chapter 11 bankruptcy reorganization, which was a tremendous learning experience. Looking back on that, it prepared me well for many of the challenges we experienced at Rite Aid.”