A provision tucked into Congress’ budget deal making generic manufacturers dole out rebates for pricey Medicaid prescriptions isn’t likely to prevent the companies from raising prices, according to several experts.
Such price increases fomented a public outcry against the generic pharmaceutical industry. Case in point is Turing Pharmaceuticals, which was criticized for raising the price of an old anti-parasite drug from $13.50 a pill to $750.
In response to this public anger, a House and Senate budget deal requires generic drug makers to offer rebates for Medicaid drugs whose price increases outpace inflation. The measure is expected to generate about $12 billion in revenue over the next decade, according to the nonpartisan Congressional Budget Office.
Currently only brand-name drugs must offer rebates for Medicaid.
However, a rebate on generic drugs would do little to curb the practice that ignited such a controversy.
“Medicaid is about 15 percent of the average drug revenues, but it varies considerably by drug,” said Gerard Anderson, a professor at Johns Hopkins University’s Bloomberg School of Public Health. “I doubt that the rebates would have much of an effect on the behavior of drug companies.”
Turing isn’t the only generic drug maker to raise prices recently. Valeant Pharmaceuticals has been criticized for raising the price by more than 200 percent of two heart drugs.
Valeant has said the drugs, Isuprel and Nitropress, are used only by hospitals and that it has worked with facilities to keep the cost down.
But Anderson has said companies can do that because there is no competition.
Turing’s Daraprim, for instance, has been around since the 1950s and is only prescribed about 10,000 times a year. There is no other generic that can compete with Daraprim, and therefore Turing can be free to raise the price, Anderson has said.
Turing has responded to the controversy by saying it will use the revenue to fund new treatments for toxoplasmosis, the parasite treated by Daraprim, but doctors have said such an upgrade isn’t necessary.
The problem is that the rebates aren’t likely to drastically change the market for older generic drugs and force companies to offer a lower price.
Since Medicaid is only 15 percent of a drug’s revenue, the companies would probably “take the 85 percent and run with it for as long as they can,” Anderson said.
Other experts linked the provision to political expediency.
“I think that the budget deal was driven a lot by the need to find money,” said Dan Mendelson, president of healthcare research firm Avalere Health. “We need to find offsets and it is often the case that the desire to find offsets will be matched by where [there] is public outrage.”
Lawmakers who have championed high drug prices were applauding the provision, though.
Rep. Elijah Cummings, D-Md., called for his colleagues to support the budget deal during a speech on the House floor Wednesday.
“I hope our bill is the first step in a longer series of actions to help American families across the country,” he said in a statement to the Washington Examiner.
Cummings has filed legislation to make generic drug makers file rebates for pricey Medicaid drugs.
The generic drug lobby believes that the rebate provision will hinder patient access to generic drugs, which are affordable options.
“The best way to maximize drug cost savings is by increasing access to and utilization of affordable medicines, not by increasing rebates,” said Chip Davis, president and CEO of the Generic Pharmaceutical Association, an industry trade group.
