40 states have a lawsuit that claims the largest generic drug makers conspired to artificially inflate and manipulate prices for more than 100 different generic drugs, including treatments for diabetes, cancer, arthritis and other medical conditions. They have emails, text messages, telephone records and former company insiders that they believe will prove a multi-year conspiracy to fix prices and divide market share for huge numbers of generic drug.
Craig Gottwals, healthcare guru, described how the Medical Loss Ratio (MLR) price control mandate in Obamacare got rid of the incentive for insurance companies to keep control of drug costs. The MLR means that insurance companies keep 15% of total medical costs. However, if medical costs and drug prices are higher then the insurance companies make more money. Insurance companies no longer cared about drug price fraud.
Hundreds of generic prices went up by 1000-2000% in 2012.
Generic drug prices are going up at 10% per year and drug prices, in general, are going up 20-25%. The lawsuit and opening up the US drug market to more foreign imports should lower drug prices. Increased competition in drugs could reduce prices. However, the big drug companies will buy global competitors to eliminate competition. The big drug companies will use any means to create pricing power.
There needs to be some adjustment of Medical Loss Ratio so that insurance companies can get some profit if they keep drug prices low and make the healthcare system more efficient.
The FDA already has the power to immediately authorize importation from Canada. This could provide a worthy trial of importation but will not necessarily provide the volume of competitors needed to avoid dramatic off-patent drug price increases. Expanding the pathway to multicountry generic drug approval and the system of reciprocal approval to additional partner regulators is an essential step to increase competition for off-patent drugs.
Effort to Import Generic Drugs from Canada and Europe for Competition
U.S. Generic Drug Market Snapshot
Population: 322 million
Population over 65: 48 million (15%)
Total healthcare expenditure: $3.12 trillion (17.4% of GDP)
Government healthcare expenditure: $1.49 trillion (47% of total)
Private healthcare expenditure: $1.63 trillion (52% of total)
Total pharmaceutical sales: $333 billion (1.9% of GDP; 10.7% of total healthcare exp.)
Per capita pharmaceutical sales: $1036
Generic sales: $70 billion (21% of total sales)
Patented sales: $244 billion (70% of total sales)
OTC sales: $19 billion (6% of total sales)
U.S.’s top five sources of imports of Pharmaceuticals (2015)
1. Ireland $15.2 billion
2. Germany $14.5 billion
3. Switzerland $9.4 billion
4. Israel $6 billion
5. India $6 billion
U.S.’s top five export destinations for pharmaceuticals (2015)
1. Belgium $6.4 billion
2. Netherlands $4.2 billion
3. Canada $3.8 billion
4. U.K. $3.7 billion
5. Japan $3.5 billion
SOURCES- Milbank Quarterly, Statnews, Armstrong And Getty- Craig Gotwalls, Health Affairs
Written By Brian Wang, Nextbigfuture.com