David's New Book

Monday, April 16, 2018

Generic Antibiotics on the Edge

Many thanks to Lew Barrett for pointing me to this article

In the struggle to control drug prices, the rapid entry of new drugs into the generic marketplace is a key step.  This was emphasized by the National Academies of Science, Engineering and Medicine in their recent report on drug prices and shortages. 

Lets talk about generic medicines (even though I’m not an expert here). My understanding of the commercial aspect of selling generic drugs is basic. You work hard to identify the cheapest route to manufacture that you can. You set a price to maximize your margin.  You understand that as more manufacturers enter the field your sales volume will drop. So you keep working on that chemical synthesis and on your suppliers and supply chain to maximize efficiency.  This allows you drop your price while still maintaining enough margin to compensate for your decreased volume of sales. Is there a limit to this strategy? Apparently. 

A 10 day supply of trimethoprim-sulfamethoxazole (Bactrim, Septra, generic) costs from $.4.00 to $15.00 depending on your pharmacy.  That is $0.20-.75 per pill. A “Z-pack” of generic azithromycin runs $7.00-25.00 for the six tablets. According to the article by Cynthia Koons of Bloomberg Business, 90% of drug prescriptions in the US are filled with generic medicines. Generic drug prices are falling about 11% a year according to Koons. This is partly fueled by the domination of only a few giant drug purchasers in the US.  These large purchasers continue to pressure generic manufacturers on price. The generic manufacturers are, in turn, forced to compensate by selling drugs where margins are higher.  Antibiotics are apparently not among this group. Brendan O’Grady noted that Teva, where he is Executive VP for their North American business, still makes antibiotics – but Teva wonders why.

At the same time, drug pricing has become a hot-button political issue here in the US. The price gouging by Mylan for their Epi-Pen and, of course, that of the now infamous Mr. Shkreli and his $750 per pill price for the antiparasitic pyrimethamine used to treat opportunistic infections in immunocompromised patients, have inflamed public opinion.  Congress is not in the mood to support higher drug prices. Yet some reasonable strategy for drug pricing is required and this strategy might involve assuring some minimum value-based price for important drugs like, say, penicillin. This recommendation was, in fact, one of many from the National Academies.

Unfortunately, though, if Congress does not take this seemingly counter-intuitive step, we will continue to suffer more and more drug shortages. As the National Academies report notes, “drugs that are not affordable are of little value while drugs that do not exist are of no value.”  

It’s the triple whammy! Congress needs to provide financial support for new research and development of new antibiotics, money to fix the broken antibiotic marketplace, and support for pricing of generic antibiotics. Wow!  And Congress still seems unable to tie its own shoelaces . . . .