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Price spikes for generic drugs deserve congressional attention

The contentious health care reform legislation passed in 2010 focused on expanding access to health insurance and on lowering health care costs. Cost control was crucial, because health care costs had been rising at rates faster than overall inflation for a decade or more.

But the law known as Obama-Care has so far only expanded insurance coverage and access to regular health care. There are some elements of the law, known also as The Affordable Care Act (ACA), that eventually could help control health care costs.

The need to bring down health care costs in the United States has been obvious for years, considering that the U.S. spends about twice as much, per capita, on health care as any other advanced country. Making the issue more troubling, the extra spending in the U.S. has not produced better health care statistics.

One of the few successes in reducing health care costs in the U.S. has been generic drugs. These are medications that are produced after a drug’s patent protection expires. The costs for generic drugs are often a fraction of the name-brand version, typically 20 percent to 80 percent cheaper than the name brand version.

Some examples of recent generic price spikes include a common asthma treatment, albuterol sulfate, which sold for $11 a bottle a year ago, but jumped to $434 a bottle last spring. Over the same period, a common antibiotic, doxycycline hyclate, jumped from about $20 for a 100-pill bottle to a current price of $1,849 — an jump of more than 8,000 percent. A medicine used to treat Lyme disease saw its price go up 4,000 percent.

The importance of generics to help control health care costs is found in the fact that about 85 percent of all prescriptions written are for generic medicines. But in the past few years, prices of some generic drugs have been skyrocketing.

Last week, the U.S. Senate put a spotlight on rising prices of generic drugs. Sen. Bernie Sanders, I-Vermont, chaired hearings of the Senate Subcommittee on Primary Health and Aging.

So far, only a handful of generic drugs have jumped in price by such extreme amounts. In general, generic drugs are increasing about 10 percent a year. That’s still troubling, given that overall inflation is closer to 1 percent or 2 percent.

When generic drug prices go up, it mostly hits insurance companies, since most patients cover only a co-pay, not the full cost of the drug. But the insurance companies will not absorb the higher costs for long. They will pass on the higher costs in the form of higher insurance premiums to individuals and also to companies that provide health insurance for their employees.

One explanation could be that the generic drug industry is consolidating, meaning companies are buying up competitors to reduce competition. With less competition, companies can more easily drive up prices.

The industry claims there are some raw material shortages and some manufacturing problems that contributed to the big price jumps. Sanders suspects something simpler — profit, saying “These companies have seen the opportunity to make a whole lot of money and are seizing that opportunity.”

The public should support efforts in Congress to stop the big generic drug price jumps. The publicity around this issue should remind Americans that they pay twice as much for health care as people in other advanced countries. They should press Congress and the president to make changes to bring down health care costs in the U.S., as Obama and other ACA supporters promised.

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