Rising Generic Acquisition Costs Prompt Congressional Hearing Request

The costs associated with pharmacies purchasing generic drugs have increased greatly enough to warrant a congressional hearing, according to the National Community Pharmacists Association (NCPA).

In a January 8, 2014, press release, the NCPA detailed a letter to the US Senate Health Education Labor and Pensions Committee and to its House of Representatives counterpart, the Energy and Commerce Committee, requesting a congressional hearing regarding the high acquisition costs.

“Over the last 6 months, I have heard from so many of our members across the US who have seen huge upswings in generic drug prices that are hurting patients’ and pharmacies’ ability to operate,” B. Douglas Hoey, RPh, MBA, NCPA CEO, wrote in the letter. “We respectfully request that you schedule an oversight hearing to examine what factors might have led to these unmanageable spikes in generic drugs (acquisition costs) and what steps can be taken at the federal level to alleviate the burden that has been placed on our members and the patients they serve.”

The costs for pharmacies to purchase certain generic drugs increased as much as 600%, 1000%, or more in 2013, according to an NCPA survey of more than 1000 community pharmacists released in December 2013. Most of the increases (99%) involved prescriptions dispensed to patients covered by Medicaid or Medicare Part D plans.

It also tended to take pharmacy benefit managers (PBMs) and other third-party payers 2 to 6 months to update pharmacy reimbursement rates, which were not updated retroactively, the survey stated.

As a result, pharmacists face steep losses when dispensing certain prescriptions, threatening their business model. Pharmacists often have few options to reduce the high acquisition costs, particularly when faced with multiple drugs that have low reimbursement rates.

“We can’t offset the cost,” John Norton, NCPA’s director of public relations, said in an e-mail to Pharmacy Times. “That’s why the more drugs that see a spike with without the corresponding adjustments by the PBMs, the more financially dire the situation is.”

Meanwhile, higher prescription copays and higher charges to patients’ drug plans may push older patients closer to Medicare’s coverage gap and force them to pay higher out-of-pocket costs, according to NCPA. Already, pharmacists in the survey report patients declining medication due to copay cost.

The most frequently cited drugs in NCPA’s survey include those used to treat high blood pressure, heart conditions, high cholesterol, seizures, psychiatric conditions, antidepressants, antipsychotics, bacterial or fungal infections, pain, and attention deficit hyperactivity disorder—relatively commonplace disorders, Norton noted.

The increases are not tied to the savings associated with generic medications, Norton said. Pharmacists have not seen a similar spike in acquisition costs for brand name medications.

“Generics compete with brands due to their cost savings, so a spike defeats the purpose for their existence in the marketplace,” he said. “Many of the brand name drugs are blockbuster drugs with robust demand … With brand name drugs, the prices are always much more expensive to begin with, so any spikes could push them out of the marketplace.”

The existing system is particularly susceptible to pharmacy acquisition cost problems, making it hard to pinpoint when the problem entered its current state, Norton added.

“With each passing year, the problem becomes more acute,” he said. “2013 was a particularly stark year for this unwanted phenomenon.”

The Pharmaceutical Care Management Association did not reply to an e-mail requesting comment.