Analysis Of Generic And Branded Drugs
Introduction
There are more than five million prescriptions filled every year, and eighty-five percent of those prescriptions are filled with generic drugs1. Generic drugs, or generic medications, are drugs that pharmaceutical companies manufacture when the brand name drug loses its patent privileges. Generic drugs are made because they are a better alternative to brand name drugs in terms of a cheaper cost alternative with the same effectiveness as brand name drugs. Brand name drugs are first approved by the Food and Drug Administration (FDA) and are sold with exclusivity rights. Once the drug can be commercially sold, the pharmaceutical companies can charge whatever price they want without the government interfering. This article will analyze the research of approved journals and discuss the issue of increasing generic drug prices, increasing brand name drugs, the role of Medicaid/Medicare plans, and discuss possible solutions.
The methods that were taken by the authors were to assemble a list of commonly used generic and brand name medications using GoodRx and then compare those drugs to determine if there was a high price dispersion. To determine if there was a high price dispersion, statistical analysis was done by calculating the mean, the median, the highest price, the lowest price, and the coefficient of variation. The higher the coefficient of variation, the more price dispersion there is in the drug. One test was done for generic medication and another for brand-name medications.
Generic Medications
The first study that will be analyzed will be on generic medications. The study used GoodRx and examined ten common medical conditions and then collected information on five generic drugs for each of the conditions2. Three of the ten medical conditions served as the test group and the other seven as the control group. The three medical diagnoses (neuropsychiatric disorders) that were chosen for the test group were Alzheimer’s disease, schizophrenia, and depression. The other seven medical conditions for the control group were diabetes mellitus-type II, hypertension, osteoporosis, urinary tract infection, osteoarthritis, high cholesterol, and asthma. Next, they recognized the five most popular drugs sold by eight distinct sellers. The volume and dosage that was the most popular for that medication on the GoodRx website2. Some drugs in the test group didn’t have five generic drugs so the drugs listed under the medical condition were used instead. Furthermore, some medications were listed for other medical conditions but only counted once. There were fourteen generic medications in the test group and thirty-three in the control group for a total of forty-seven.
For each generic drug, the highest price, lowest price, the mean, the median, and the coefficient of variation were determined. Further calculations were done to determine the high to median ratio, the high to low ratio, and the p-values. The mean price coefficient of variation for all drugs was forty-three percent, sixty-one percent for the test group, and thirty-five percent for the control group2. The mean high-to-low ratio for all drugs was 3.7. The mean high-to-low ratio for the test group was 5.9 and the control group was 2.8. The mean high-to-median ratio for all drugs was 2.4. The mean high-to-low ratio for the test group was 3.7 and the control group was 1.9. More noteworthy calculations were the p-value comparisons between the coefficient of variation, high-to median ratio, and the high-to-low ratio. The p-values were 0.0022, 0.0018, and 0.0005, respectively2. A p-value less than 0.05 means there is a significant difference in the price dispersion of the drugs. The high price dispersion among the test group and the control group is noteworthy.
One could speculate as to why we are seeing high price dispersion among generic medications. Firstly, the drugs that were in the test group were all neuropsychiatric drugs. Typically, these types of drugs are much harder to manufacture than other types of drugs and there is a fewer selection for the patients to choose from. The pharmaceutical company could charge any price that would maximize their profit, and the consumer would still have to buy it. In contrast, other medical disorders could be treated with numerous medications, which increases the free-market competition and reduces the cost of the treatment option2. Secondly, the caregivers may not know much about alternative options when paying for the drug, so there just forking out the cost of the drug prescribed. Thirdly, we might be seeing these high price dispersions in generic medications for the test group is because there is a lack of transparency between the doctors/pharmacists and their patients2. Transparency would educate the patient resulting in them purchasing a cheaper alternative medication and lowering the price dispersion of generic medications. Lastly, there was a study done by Dan Ariely, a behavioral economist at MIT, where his team proved that a $0.10 pill doesn’t kill pain as well as a $2.50 pill, even though they were both placebos3. A patient might think that a more expensive pill treats symptoms better than an inexpensive pill could bring about the results shown in this study. This study proved that there was price dispersion among neuropsychiatric medication, but the data can’t extrapolate for the population as the test group contained only neuropsychiatric disorders. Further tests would need to be done to see if all medical disorders have an increasing price dispersion.
Brand Name Medications
Another study was done to show that brand name drug prices in the United States are increasing at astronomical rates. Most of the population has some kind of shared benefits plan through an insurance company4. Consumers don’t realize the full drag of payments when paying out-of-pocket. Therefore, studies that show increasing drugs of all kinds are necessary to educate patients.
The methods are taken in the second study using a third-party website, Blue Cross Blue Shield (BCBS) Axis, to extract information from the top-selling drugs between the years of 2012 to the end of 20174. They analyzed one-hundred thousand claims of certain medications prescribed by particular pharmacies and then narrowed the parameter to drugs that exceeded total sales of five-hundred million in the United States or one billion worldwide. The primary focus was to represent the out-of-pocket sum paid by the insured member and the cost paid by the insurance company. If one unit of a specific drug was one-hundred dollars and two-hundred for two units, the drug would still be considered as one-hundred dollars per unit. Monthly price changes were calculated by comparing median costs to the previous month. The last step was to calculate p-values based on a correlation test.
There were 132 brand name prescription drugs identified that fit the criteria but only forty-nine of those drugs were considered for the study because some drugs weren’t commercially available within the six-year time frame4. Of the drugs evaluated, the median increase in the cost was seventy-six percent. Ninety-eight percent of the drugs showed annual/biannual price increases as well as price hikes of one to two times per year. The mean annual price increases of all forty-nine drugs were nine percent. The correlation test showed a fairly high value of 0.6, meaning there was a fairly consistent increase in medication costs for all kinds of brand-name drugs4.
The authors concluded that increased pharmaceutical costs need to be balanced to incentivize patients4. The United States can’t allow drug companies to extend their patent exclusivity, which forces the free-market competition to decrease since there won’t be any generic/biosimilar medications being produced. The authors point out that it would be beneficial for the consumer to negotiate drug prices if no regulations are being placed on pharmaceutical drug prices. Lastly, the authors push for bold actions to be taken to restrain pharmaceutical price hikes.
Possible Solutions
Drug price increases are beginning to be a major issue that’s discussed in the media. As the issue becomes more prevalent, there needs to be something done to solve the problem. Some possible solutions include a rigorous requirement on exclusivity rights, incorporating government restrictions, and enhancing competition in the free market by allowing generics to be manufactured without roadblocks, educating patients, prescribers, and policy makers5-8. Ultimately, if these solutions were put into action, they would lower the prices of pharmaceutical drugs.
Conclusion
Increasing drug prices in America are a major issue that is now seeing attention in the media because of ridiculous prices for all kinds of generic and brand name medications. This article showed that generic medications had a high price dispersion and brand name medications are increasing at astronomical rates. The findings only apply to patients that pay out-of-pocket and that don’t rely on health insurance coverage to fork out the cost. Possible solutions that could be taken are to increase transparency with the patient as well as put restrictions on pharmaceutical exclusivity rights. Restrictions on exclusivity rights will foster market competition and ultimately reduce consumer spending on prescription drugs.
