Question

In August 2015, Turing Pharmaceuticals raised the price of Daraprim from $13.30 a tablet to $750, an increase of 5,456 percent (Over and Silverman 2015). Daraprim is the only available treatment for toxoplasmosis, a rare infection that can become deadly for patients with weakened immune systems. This price increase means that an individual's treatment could cost up to $634,000. Daraprim's patent expired in 1953, and it can be compounded for less than a dollar per tablet. (Langreth 2015).

Two contradictory trends are evident. Generic drug prices have been declining in the United States since at least 2010, yet multiple generic drugs have risen in price.(Ornstein and Thomas 2017). The price increases generate far more attention than the price decreases, yet the structure of the market has not changed.

In the United States, pharmaceutical prices (indeed most medical prices) are based on negotiations between private insurers and suppliers. The US market has two features that are uncommon in other countries.. First, pharmacy benefit managers often act as an intermediary between insurers and suppliers. Second, the federal government plays a limited role in negotiating prices. Although the Department of Veterans Affairs negotiates drug prices for its beneficiaries, private firms negotiate for Medicare.

Questions

6.     Can you provide another example of large price increases for off-patent drugs??

Answer 1

Question 6 answer :-

The average price of physician-administered drugs declined by between 38 and 48 percent following patent expiration.

When a drug's U.S. patent expires, manufacturers other than the initial developer may take advantage of an abbreviated approval process to introduce lower-priced generic versions. In most uses, generics are clinically equivalent to the original branded drug. Some drugs are straightforward to imitate and produce at low cost. Others, particularly those requiring sterile manufacturing conditions or similarly complex production processes, are much more costly to copy.

how generic introductions affected the pricing, sales, and use of the 41 cancer-related specialty drugs that lost patent protection between 2001 and 2007.

The authors find clear evidence that competitors entered the market and prices fell after patent expiration. Typically, between three and five manufacturers applied to produce generic versions of complex-to-manufacture physician-administered drugs. There were more applicants, 6.3 on average, for oral drugs. Average drug prices dropped after expiration. The average price of physician-administered drugs declined by between 38 and 48 percent following patent expiration. The decline was more modest, about 25 percent, for oral drugs. For these drugs after generic entry, high and increasing brand prices partly offset low and decreasing generic prices. Sales volume appears to increase substantially following generic entry, consistent with the usual assumptions regarding the negative relationship between prices and quantity demanded. As a result, total revenue from sales of both categories of drugs increased after patent expiration. For physician-administered drugs, the average increase in total revenue was 57 percent, while for oral drugs the increase was 46 percent.

Brand-name prescription drugs are sold at extremely high prices in the US because patents and other market exclusivities provided by the government allow manufacturers to exclude direct competition. This period of market exclusivity was intended for pharmaceutical manufacturers to recoup costs associated with research and development of those products and make profits. The other intended outcome of this system is that the market exclusivity period for brand-name drugs should be self-limited, with competition being able to flourish after the market exclusivities end. Such competition has been most effectively supplied by generic drug manufacturers that produce Food and Drug Administration (FDA)-approved bioequivalent versions of the brand-name product. The market entry of these generic drugs — with market uptake augmented by automatic substitution of brand-name prescriptions at the pharmacy — remains the only market intervention that lowers prescription drug prices consistently and substantially.

Generic manufacturers can make their drugs available at considerably lower cost because of various market advantages they have over brand-name drugs. When this process does not operate as intended, drug prices do not fall after market exclusivity expiration, or prices for generic drugs may actually increase. In this paper, we examine the variety of factors that mitigate the cost savings associated with introduction of interchangeable generic drugs, especially older, off-patent drugs. We then consider policy solutions that may help stabilize the generic drug marketplace, diminishing the frequency and impact of generic price increases.