Generic drug pricing confirms that markets are not working

Medicare Drug Spending Dashboard

By Andy Slavitt, Acting CMS Administrator and Niall Brennan, CMS Chief Data Officer
The CMS Blog, December 21, 2015

Today, CMS is releasing a new online dashboard to provide information on Medicare spending on prescription drugs, for both Part B (drugs administered in doctors’ offices and other outpatient settings) and Part D (drugs patients administer themselves) to provide additional information and increase transparency.

In today’s announcement, the topline findings include:

* The diversity, growth, and impact of drug spending in the Medicare program – while the high-cost drugs include brand name Hepatitis C and cancer therapies, some generic drugs are seeing large price increases.


Competition Not Stopping Drug Price Hikes, Medicare Data Shows

By Brianna Ehley
Politico Pulse, December 23, 2015

If you think a marketplace monopoly is behind all massive drug price hikes you might want to take a look at the new CMS drug spending dashboard. Eight of the 10 drugs that had big cost increases between 2013 and 2014 were made by multiple manufactures. Among them were five drugs that more than doubled in price during that time. If you expand to taking a look at the 15 drugs with the largest increases, nearly two-thirds or 9 of the 15, were made by multiple manufacturers. This data may throw a wrench in a popular solution proposed by Congress to deal with exponential drug price hikes — have FDA review faster the generic applications for drugs with a market monopoly but no patent or exclusivity protection. Furthermore, only one drug in the top 15 for the biggest price hikes was listed on the FDA’s drug shortage list during 2013-2014, which means we can’t blame companies taking advantage of a limited supply either. Take another look at the drug spending dashboard released this week and play around with the information yourself:



By Don McCanne, M.D.

Only Rip Van Winkle would not know that drug prices are totally out of control, yet the pharmaceutical industry tells us that there is no problem since the market will price drugs appropriately. But instead of competition bringing down prices, their concept of market dynamics is to push up the prices to the maximum that will be tolerated by patients who are partially insulated by various public and private payers.

If there is an area in pharmaceutical pricing in which competition should work, that would be the competition between generic products that are no longer under patent. But looking at the Medicare drug spending dashboard, it is obvious that the pharmaceutical firms have been able to push pricing of several generic drugs well above the levels that would be expected in a well functioning free market.

When the Republicans passed the Part D Medicare drug program, they prohibited Medicare from negotiating drug prices, instead insisting that the markets would be more effective in bringing drugs prices down. But instead the insurance and pharmaceutical industries have been allowed the freedom to essentially establish their own rules on how markets work. Their rules allow them to maximize their revenues while patients are being gouged, either directly or through taxes and higher insurance premiums. Adam Smith would agree that this corrupted version of markets is no market at all. They are using their control of essential medications to extort us. Extortion is not a tool of normal markets - quite the opposite.

We do not need to recite again the work by Nobel laureate Kenneth Arrow on why health care markets do not work. We have already proven that our reliance on markets is not effective by the mere fact that we spend, per capita, over two and one-half times as much on health care as the average of other wealthy nations.

We simply need to push the ideologues aside and put into place public policies that other nations have used to obtain value in their health care purchasing. The model most suitable for us would be a single payer national health program - an improved Medicare for all.