How to save money on generic drugs — and why they are getting so expensive

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Have you ever bought generic medicine to save money? This go-to move can cut your costs by 80% to 85% compared to buying name-brand, per Food and Drug Administration data. Yet you may have noticed the cost of generic drugs has actually risen in recent years — making it harder for many to afford crucial treatment.

There are a few theories about where the blame lies: Critics have pointed to profit-seeking middlemen like pharmacy benefit managers, who help insurers manage prescription plans. Consumers have focused their ire over rising drug prices on high-profile pharmaceutical executives. But the picture is complex.

Now, a paper from researchers at University of Florida suggests a different reason for rising generic drug prices: a lack of competition. Generics by definition are not protected by patents and can be produced by multiple makers, but many are currently made by just one manufacturer. That in turn can lead to prices nearly quadruple what they would be in a more competitive environment, said Chintan Dave, the paper’s lead author and a graduate student at the University of Florida College of Pharmacy, in a phone interview.

“It’s almost four times the difference,” Dave said. “Imagine a monthly supply of $60 versus $15. It’s a big difference over a month.”

Specifically, generic drugs — which, per the FDA, are “chemically identical” to branded medicines — appear to be more affected by a lack of competition than their higher-priced brand rivals, the study found.

How much does competition affect prices? Between 2008 and 2013, generic drugs with four or more manufacturers got about 32% cheaper, according to the study. But in a non-competitive marketplace with only one manufacturer, prices actually rose about 47% over those same five years, after controlling for other factors like shortages and how the drug is administered. The study used data compiled from more than 1 billion drug claims across 1,120 generic drugs.

One problem in the U.S., Dave said, is consumers and the government have less negotiating power over the prices set by drug makers — since bargaining tends be the purview of insurers and middlemen like pharmacy benefit managers. A 2016 paper from the Journal of the American Medical Association reached similar conclusions, arguing that “the primary counterweight against excessive pricing during market exclusivity is the negotiating power of the payer, which is currently constrained by several factors.”

How can the U.S. make generic drugs more affordable?

Much of the burden of addressing the problem, Dave said, should fall on regulators. He noted, for example, that the FDA recently made it easier to fast-track approval for generic drugs with too few makers: Up to three applications to produce generics can be fast-tracked for a given medication. This will have the practical effect of making it easier to get certain generic drugs to market — assuming multiple makers choose to produce them.

“That’s a really positive step,” Dave said. “But that assumes that the reason we’re seeing the price increases ... is because [of an] FDA backlog. … If you look at the Turing cases or the Valiant cases, there was no manufacturer who wanted to make the drug.”

Ideally, the Federal Trade Commission would also be more aggressive in blocking prospective mergers among pharmaceutical companies, Dave said, since they reduce competitive pressures. Allowing freer drug imports from other countries is another possibility, but that is unlikely, he said, because the FDA will want to remain a “gatekeeper” about which drugs are and aren’t safe enough for U.S. consumers.

Barring calling your local representative and agitating for prescription drug reform, Dave said, there’s not a ton consumers can do if they need a life-saving medication that’s only produced by one manufacturer: “Drug imports is probably the only option I can think of right now.”

Drug import laws for individual consumers are complicated but lackadaisically enforced. “The agency doesn’t go after individuals, per se,” Tom McGinnis, director of pharmacy affairs for the FDA, told WebMD. “The agency has tended to focus its priorities on people making money from this illegal activity.” To that end, the FDA’s website says it “typically does not object to personal imports of drugs that FDA has not approved ... [if] generally, not more than a 3-month supply of the drug is imported.”

These laws are loosely enforced, and an estimated 5 million people purchase prescription drugs from Canada each year. Even some states, including Kansas, Illinois and Wisconsin, have tried to import prescription drugs from Canada to offer them more cheaply to residents, according to CNBC, although these shipments have sometimes run afoul of the FDA and been confiscated.

When considering any kind of medication, it’s always important to talk about your safety, symptoms and medical history with your physician. The National Institute of Health offers a wealth of resources about how to communicate more effectively with your doctor, including resources for specific illnesses.

Finally, know that even non FDA-approved drugs may be permitted into the U.S. as a life-saving measure — if a patient can provide documentation from their physician.

How to save money on drugs in general

Buying generic is smart: According to the Congressional Budget Office, generics typically save consumers an estimated $8 to $10 billion a year. But beyond avoiding brand-name drugs, being choosy about where you shop for medicine can also make a difference.

A Consumer Reports investigation found that prescriptions tended to be cheaper at some online retailers and big-box stores like Costco and Sam’s Club than through retail drugstores like CVS and RiteAid.

Having trouble getting your insurance company to share or cover your drug costs? Consider submitting an appeal letter, or asking your physician to submit one on your behalf. Also remember that under the provisions of Affordable Care Act (still the law of the land), preventative care and certain drugs — like vaccines and birth control — should always be free. Again, you may need the help of your doctor to push your insurer to follow the rules.

Finally, though generic drugs are more likely to see price hikes when there’s not enough competition, they still tend to be far cheaper than branded alternatives; alas, doctors don’t always necessarily prescribe generics without being asked, so double check with your service provider.

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James Dennin

James is a staff writer covering money and millennials. Send your tips and your money problems to jdennin@mic.com.

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