Why Many Generic Drugs Went up 10-60 Times in Price

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.

Health Affairs looks at the issue of opening the US market to foreign drugs.

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

The International Trade Administration has a summary of the global generic drug market.

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

Generic Drug markets in the USA and European countries was compared in a 2017 Milbank Quarterly.

SOURCES- Milbank Quarterly, Statnews, Armstrong And Getty- Craig Gotwalls, Health Affairs
Written By Brian Wang, Nextbigfuture.com

37 thoughts on “Why Many Generic Drugs Went up 10-60 Times in Price”

  1. So government mandated price, or rather, profit controls along with bans on drug imports, destroyed our free, correction, its not free any more, Our markets own methods for reducing cost.

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  2. You can say similar things about all the rationed necessities of life.Ex:12 oz. can of spam costs around $2.50, only wealthy people with $2.50 will eat while millions would starve, would you call that fair pricing? Don’t forget, money is just a generic ration card.

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  3. Ironically, it all started off as a Heritage Institute idea. Force people to pay for insurance through a mandate or pay penalties. Not something old style democrats would have voted for. Biden is a corp shill like Obama–who wanted Transpacific trade.

    Trump, a Republican, acts like Gephardt–an America firster.

    Go figure.

    When Reagan helped give us blanket amnesty–it was unions who were pro-border who got called knuckle dragger dixiecrats. Now it is trumpers.

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  4. I looked online for these budget cuts and I could only find a 2% cut in one year out Obama’s eight. The rest were all increases in the VA’s budget during Obama.

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  5. Of course there is only one solution and that is for the US to nationalize our generic drug companies. The NIH could then set drug prices at cost plus 10% while the FDA would have a much easier time check on best manufacturing requirements. Also pass a law that no CEO can make more than $1 million a year salary and bonus. They are the crooks that are raising the prices.

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  6. Taking it a step further, after my divorce I was in bad shape financially, despite a high-paying job as an IT consultant/contractor during the dot-com years. So I looked hard when I was approached by folks who wanted me to teach evening courses at the nearby university (I had done it in the past, years before).

    Then I saw how much of that extra money I earned would go to taxes, and how much my ex would take, and it wasn’t worth giving up three of my evenings each week, not by a long shot. Not when no one was going hungry, or lacking a solid roof over their heads.

    Taxes should not discourage people from earning more (i.e. being more productive) and, if anything, should encourage saving over spending.

    A progressive income tax does the reverse. The cart is before the horse.

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  7. I’m not sure where you get your data from. Many first world countries don’t have single payer. Australia for example.

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  8. Because the insurance, big pharma, and health care industry executives make rather nebulous targets.

    Also, a lot of people don’t like it when they know someone else is smarter (intellectually gifted) than they are so they are happy to target medical doctors (who, as a group, have one of the highest average IQs of any occupation).

    People routinely brag about how much they can bench, or how far and fast they can run, and what professional athlete can do what, but anyone who talks about their IQ is a pariah. They will also get to hear all kinds of justifications why IQ don’t mean nuthin’ anyhow. Although that’s not entirely wrong when that IQ doesn’t accompany a fair bit of education and a heaping helping of ambition. But then again, a lot of people also hate people who are more educated or ambitious than they are.

    As to the 50% taxes? Because for some weird reason this country wants to tax income, rather than consumption, penalizing increased earnings and providing less reason to save money.

    Come to that, sales tax could be considered a ‘usage fee’ for currency, and a stable currency is just about the most valuable thing a government can provide.

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  9. People say this, and I do believe many had bad experiences. But I’ve been through a lot with the VA and they’ve been super every step of the way, going way beyond what I would expect at a civilian health care provider.

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  10. The problem here is that, absent regulation, the Traditional Capitalist System you describe will inevitably evolve to a Corporate/Global Investor Capitalist system. Even with regulation, regulatory capture will move things in the same direction as the unregulated “free” market.

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  11. Yes. If there is only one producer of a drug.
    Who prevented the import of cheaper generic drugs?
    Who prevented competitors from entering the market?

    US legislation.

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  12. Not speaking to the rest of your point, but gritty Everyman (TM) advice notwithstanding, the guy who graduates bottom 1/3 of his med school class because he fucked off and partied is still going to make 6 times the guy who worked his ass off at an actuarial science degree. A lot of people work their *REAR* off and make nothing simply because there’s less value in the field.

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  13. How about you take a poll of Israeli, or European, or Canadian etc. people about whether they would like to give up their single payer system for ours? We are the only first world country without a single payer system like this. I am not saying single payer is good or bad, but the truth is our current system sucks and these other countries pay less for better outcomes. People with health issues will just keep being driven to bankruptcy, and our medical costs will continue to grow far past the rate of inflation until we have fixes that won’t be politically castrated and both parties support.

    Of course, that will never happen because in our partisan politics it is impossible for one party to do something and not have the other cut their own constituents throats just to drive that wedge. It is far more important to our political parties to be in charge than it is to do things that are actually good for the country. The biggest weakness we have as a country is our scorched earth partisan political system.

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  14. First off, I was not advocating either system. I was just pointing out a few points. Second, why don’t you take a look at the VA budget cuts under Republicans before you make that statement. They caused the underfunding of the VA as a political ploy against Obama, then used the problem they created as a political wedge. People do not fact check and thus are easily led to believe whatever the political class wants them to believe.

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  15. “So you believe that when people associate together that they lose the ability to advocate? ” Lobbyists and money in politics is a huge problem whether you care to admit it or not. When our citizen votes get drowned out by lobbyists with special access, it is no longer my country. When it is no longer my country, watch out.

    “We were told it was going to bend the cost curve downward” Might have, except the Republican sabotaged any attempts to make any fixes to it at all. I guess we will never know, because it legislatively never had a chance.

    “Neither are the Democrats who want to bring about Medicare for all.” A lot of them do, and it would make our health care system just like literally every other first world countries. Obamacare was a middle ground solution between private health insurance and Medicare for all. Since we don’t have that, Democrats are pushing for the full monty. Guess what, they might get it too, and then the Republicans would do everything they can to destroy it too. Thus we get stuck in a ping pong battle while countries who are capable of getting their political smack together surge ahead of us while we spin our wheels.

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  16. “The Republican Party is not interested in fixing anything from Obamacare”

    Neither are the Democrats who want to bring about Medicare for all.

    “The ACA is too expensive anyway, locking in our overblown health care costs”

    We were told it was going to bend the cost curve downward.

    “medical lobbyists are exercising their free speech”

    So medical lobbyists don’t get free speech?

    “(the US Supreme Court already ruled money is free speech and corporations are people)”

    So you believe that when people associate together that they lose the ability to advocate? Unions for example would lose the ability to buy political ads because they are associations of people? Because that is what Citizens United is really about.

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  17. I have a younger relative who for the most part is fatherless (dad is kind of a worthless absent guy). Years ago I talked to him when he was in High school and impressed on him how the world really works:

    If you work you *rear* off in college you will be financially set later on in life. College isn’t were you go to party, it is where you go to study to be smarter than everyone else. How far you go depends on how hard you push yourself.

    He listened, worked his *rear* off and just graduated from USC med school, does orthopedic surgery and makes more money than me despite being about 20 years younger than me. He is paying down hundreds of thousands of dollars of college debt.

    At a family celebration we talked and he had two basic questions:

    1. Why am I paying almost 50% taxes between state and federal taxes?
    2. Why do people consider doctors the bad guy?
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  18. Do the doctors in other countries also have to pay somewhere between 50,000 to 150,000 a year in mal practice insurance?

    Also while we are at it the US system is run by insurance groups and they charge people in a COMPLETELY different way than their foreign counterparts.

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  19. That might be true in a free market. Otherwise, “fair” is whatever the government will bear, which is pretty much what we’ve got now.

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  20. There is fair and wise. The truth is we now have the

    Corporate/Global Investor Capitalist system: which I hate to say is looking more and more like a actual Disease that just devours resources until the system it inhabits breaks under the strain of its relentless draw (Think Ebola).

    Traditional Capitalist System: Think the more old school free market. It doesn’t have the exponential growth opportunities like the former however it when left alone will become a net positive on the system (think the bacteria in your guts or on your skin which protect and nourish the system).

    Think of it this way. The old school was that you as a manufacturer and designer of tools made a Lot of money making the best tools. Because of this you were able to expand. The people in charge knew the business and how to run it. They took Pride in doing the job right people bought-there for people invested money.

    The new school…You manufacturer tools, also candy, pharmaceuticals, toys and a dozen other products which can change at any one time. You have no idea how to really do any of those things. You exist by simply buying out any company that looks profitable in the short term then running said property into the ground over time for short term proffits. Enormous amounts of capital is created. Sale said company and its products to another investment firm. Report to investors the enormous growth in capital.

    Investment firms make nothing but capital. Everything is irrelevant other than that.

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  21. More to the point you’d have to be paying attention. Most people weren’t and were entranced by the idea of “bending the cost curve downward” (lol).

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  22. A big issue with getting American health care costs down is that US doctors & nurses are paid a lot more than their counterparts in other first-world countries; it depends on the speciality, but doctors in the US are often making ~50% more than their equivalent does in western European countries. And naturally those doctors & nurses will fight tooth & nail against any changes that would result in lower salaries for them.

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  23. Hey now, if we are lucky a federally run health care system would just as efficient and well run as the Indian Health System . . .

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  24. There is a government-run health care system in the US for the “little people” and it’s called the VA. As bad as Obamacare is, the VA “single-payer” program is even worse. But please, let’s hand over health care of 320 million people to the people that FUBAR the care of vets.

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  25. I depend on some drugs in order to stay alive. So this topic is important to me. But I am also acutely aware of the advances in medicine and the exponential rate they are advancing.
    Soon there will be no need for drugs, genetic engineering will cure/prevent all diseases in everybody. That time is coming FAST!
    There are at least 3 clinical trials in humans using genetic engineering going on now. They are now offering genetic engineering for pet dogs. A dog’s drug/therapy only takes 1 year for FDA approval, so research on dogs is surging forward. Much of that dog research will be applicable with modifications to humans. You can even buy cheap genetic engineering kits on ebay for your own personal experiments. The two little girls in China who had their genes changed so they can resist AIDS also got a boost in their IQ.
    Of course the greatest advancement of all is when they enhance EVERYONE’S intelligence with a single shot/treatment. And when I say enhanced. I am talking a factor of 5X or 6X.And these one time treatments will be cheap.

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  26. “Increased competition in drugs could reduce prices.” Economics 101, the best way to ensure better service and lower prices is through competition.

    “there needs to be some adjustment of Medical Loss Ratio” The Republican Party is not interested in fixing anything from Obamacare, they just want it gone, or any other government influenced health care except the one the Congress critters get for themselves. They’re just fine with their own government health care, but not for us little people. The ACA is too expensive anyway, locking in our overblown health care costs instead of making a sincere effort at lowering them like the rest of the single payer OECD countries do. One study I read showed that, if we had the same single payer system as Israel, we would save around $300 billion a year. That is why it will never happen, because medical lobbyists are exercising their free speech (the US Supreme Court already ruled money is free speech and corporations are people). As long as that happens, nothing changes without drawn out legal action.

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  27. Cut the man some slack with your ageism. He could very well be an advanced 8 year old reader. They are born with a good memory. Oba-mama might have been his first word 🙂

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  28. I disagree. If a life-saving treatment only cost $100 but is sold for a million dollars each to a dozen wealthy patients, while a thousand regular patients are left to die, would you call that fair pricing?

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  29. I’m old enough to remember when the drug companies were the first people to sign on to Obamacare. Now we see why.

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