HHS Investigates Rising Generics Prices

In response to congressional pressure, the HHS inspector general will investigate how recent increases in generic drug prices have impacted the Medicaid rebate program and whether those increases exceeded the inflation rate in 2005 through 2014.

In an April 13 letter to Sen. Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.), Inspector General Daniel Levinson says his office will determine the extent to which the quarterly average manufacturer prices for the top 200 generic drugs, as ranked by Medicaid reimbursement, overshot the specified statutory inflation rate and the amount of additional rebates the program would have received if the inflation rate had been applied.

The investigation follows prodding by the two lawmakers, who last October sent letters to drugmakers requesting information on drug revenues, sales expenses and price setting for 10 drugs that had experienced substantial price hikes in the previous 14 months. Those letters referenced a survey by the Healthcare Supply Chain Association, which found that found that wholesale prices on some generic drugs jumped by hundreds or thousands of percent between March 2013 and May 2014.

Sanders and Cummings followed those letters with one to Inspector General Daniel Levinson in late February.

Meanwhile, lawmakers are pushing to pass House and Senate bills forcing generics makers to pay rebates to state Medicaid programs for drugs whose prices increase faster than the inflation rate. This practice is standard for brand-name pharmaceuticals.

The Generic Pharmaceutical Association claims the lawmakers are mischaracterizing the facts about generic drug prices. “Since 2008, the price of brand drugs has almost doubled, but the price of generic drugs has been cut roughly in half,” President Ralph Neas said, noting that generics saved $239 billion in 2013 and more than $1.46 trillion over the past decade.

OIG did not give a time frame for completing the review. — Jessica Grinspan