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GAO report: Despite some increases, Part D generics prices down since 2010


WASHINGTON — In spite of some “extraordinary” price increases, a new report from the U.S. Government Accountability Office is showing that overall, generics prices declined under Medicare Part D between 2010 and 2015. 


According to the report, among a group of 2,400 generics in Part D’s “changing basket” of continuously and occasionally billed drugs, there was an overall price decrease of 59% from the first quarter of 2010 through the second quarter of 2015. During the same time frame, among 1,441 drugs billed continuously for each quarter being examined, prices decreased 14% — about 0.7% per quarter on average. This lower price decrease reflects both rapid price decreases between 2010 and the end of 2012 (22%) and an increase of 10% between the fourth quarter of 2012 and the second quarter of 2015 — an increase about four times greater than the 2.3% general inflation seen during that time period. 


During the time period the GAO examined, the report says 315 of its 1,441 established drugs saw “an extraordinary price increase,” which the GAO defines as a price increase of “at least 100%.” Most of these extraordinary price increases were between 100% and 200%, but GAO notes that some outliers saw higher increases. Forty-eight saw hikes of 500% or more, while 15 saw their price increase by 1,000% or higher. 


Due to initially low prices, some drugs that saw extaordinary price increases still cost very little as a result. As an example, GAO pointed to 20-mg hydrocortisone oral tablets, which went from $0.16 per tablet in Q1 2012 to $0.41 per tablet in Q1 2013 — an increase of 160%. At the same time, about half of the established drugs saw price decreases, but the GAO highlighted that increases alongside decreases had an effect on the overall price decline in the last five years. 


“GAO found that drugs with extraordinary price increases moderated the overall decline in generic drug prices,” the report summary says. “Additionally, the extraordinary price increases generally persisted for at least 1 year and most had no downward movement after the extraordinary price increase.”


The GAO also spoke to industry stakeholders — among them manufacturers, pharmacy associations and pharmacy benefits managers (PBMs) —  about what influences generics prices, with many of them discussing access to active pharmaceutical ingredients, production volume, supplier and buyer consolidation  and incentive to enter the market as factors influencing price. Above all else, competition was the main factor stakeholders pointed to as influencing price. 


“As long as manufacturers continue to enter the market, generic drug prices continue the general downward trend,” the report says. “According to manufacturers, prices remain low until firms begin to exit the market, which can happen if the drug becomes unprofitable, either due to production costs or low market share. As a result of these factors, manufacturers of generic drugs face a competitive threat that serves as an incentive to keep prices low.”


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