PHSI routinely tracks industry trends and changes to provide timely and valuable information to our clients.  One recent, notable change has been unusually large price increases (500% to 3000%) for a variety of multisource generic products. We are accustomed to the daily price changes that exist in the “sea of generics”.  However the recent changes are seismic in nature and are creating “tidal waves”!

Through our research we have identified six factors that seem to be contributing these drastic changes.

1. Generic industry consolidation – Recent mergers and acquisitions have led to fewer suppliers in the market and higher prices due to less competition.  Examples include Actavis/Watson and Sandoz/Fougera/Falcon.
2. Supply issues with global market products – Ranbaxy’s regulatory, Lockhart’s import ban, Apotex supply issues are all leaving limited suppliers in the market.   This leads to price increases and increased demand as retailers are spec buying where possible and the remaining suppliers cannot supply the market.
3. Companies reviewing product portfolios – Cost to make product vs. price it can be sold at in the marketplace.  We have seen this for years with injectable generics in the hospital market.  This trend has moved over to oral solid generics leading to manufacturers deciding to cease making a product resulting in less competition and higher prices.
4. E-Pedigree  – Future 2D Barcoding requirements will increase supplier costs forcing a decision to either increasing the price or exiting the market on some products.
5. Quasi-Exclusive or Exclusive –  Many suppliers are re-evaluating their position in the market and increasing prices when they identify limited supply situations.
6. Difficult to make products – Products such as creams, ointments, patches, ophthalmic products have higher barriers of entry for generic suppliers.  This impacts price competition and leads to higher prices across the board for these dosage forms.

The impact of these drastic generic cost increases affects all stakeholders.  Pharmacies are seeking product at the “old, lower costs” and buying up all they can when they learn about these drastic price increases. This impacts the supply chain and creates shortages in the distribution channel.   Payers are facing increasing complaints about generic reimbursement rates that are now below cost for these products.  Payers are challenged with when to increase their reimbursement when some pharmacies have guarantees on product pricing or have ordered in additional product in advance of the price increase while other pharmacies are buying at the much higher prices.  Patients with deductibles and percentage co-insurance are being impacted with higher out-of-pocket copay costs.

PHSI will continue to monitor this key area and we welcome your input and insight on generic product cost increases, reasons behind this, and the challenges it creates for your organization.  Please send your comments to Feedback@phsirx.com