Drug Bust: Generic Drug Prices On the Rise

Jeremy A. Greene | Slate | November 20, 2014

For 30 years, generic medications helped make health care cheaper. Why is their cost surging?

Earlier this fall, a gathering of Washington politicians and wonks celebrated the birthday of a piece of paper: the Price Competition and Patent Extension Act of 1984, also known as the Hatch–Waxman Act. When the bill was signed into law 30 years ago, it streamlined the approval process for bioequivalent generic drugs as soon as the patent expired on the original medication. The subsequent expansion of the generic drug market, from less than 3 out of 10 prescriptions in 1984 to more than 8 out of 10 by 2014, is one of the few success stories among the United States’ many failed efforts to provide high-quality health care at a lower price. Total U.S. pharmaceutical expenditures actually dropped in 2012, and the Generic Pharmaceutical Industry Association estimates that generic drugs saved the American health system nearly $1.5 trillion dollars from 2004–2013.

Beginning this week, however, Washington will host a very different conversation about generic drugs, as independent Vermont Sen. Bernie Sanders (chairman of the Subcommittee on Primary Health and Aging) and Maryland Rep. Elijah Cummings (the ranking Democratic member of the Committee on Oversight and Government Reform) open a set of hearings into the rapid increase in generic drug prices in recent years. Drugs previously available at pennies per pill now cost hundreds of dollars per bottle. And not just esoteric, small-market drugs, either: the antibiotic doxycycline, a workhorse drug for common infections from sinusitis to pneumonia, cost $20 per 500-count bottle last October. Last month, the average price for the same supply was $1,849. For a drug initially approved by the FDA in 1967, the price hike seems mystifying...