Recently, I left my dental office with a generic drug prescription and paid less than $3 for it. Medicare paid the major portion, but I admit, I had reverse sticker shock. After the EpiPen scandal, where a generic drug that normally sold for $50 suddenly shot up to $300, I felt I got off lucky. (Click) I even wondered if the pharmaceutical company that produced the pill made much money. A little reading on my part led me to discover it probably didn’t. (“Generics Makers Need a Different Strategy,” by Cynthia Koons, Bloomberg Businessweek, April 16, 2018, pgs. 15-17)
While the public imagines pharmaceutical companies are ripping off patients, generic drug companies that produce the time-honored medications relied upon for decades, pain killers and antibiotics, for example, aren’t raking in big bucks. Evercore ISI Research shows generic drug prices “are falling about 11 percent a year while name brands are rising about 8 percent a year.” (Ibid pg. 16.)
Teva and other large generic drug companies are inundated with competition as smaller companies flood the market. Also, consolidation among the middlemen, drug dispensers like Walgreens and CVC are causing a pinch. Today, there are only four retail giants in the U. S., aptly nicknamed “Four Horsemen of the Generic Apocalypse.” Target and Walmart are the other two. (Ibid pg. 16.) Together, they have used their purchasing power to reduce drug prices. That sounds like good news, but it isn’t. The profit margin for manufacturing common generics is slim to none. Because of it, some manufacturers no longer make these drugs. Others have begun exporting their manufacturing jobs to India, which is bad news for the American worker. (Ibid, pg. 17.)
Some drugmakers are looking for other ways to distribute their products, bypassing the “Four Horsemen.” Amazon, United Parcel, and FedEx may eventually be players, but because the change is disruptive, it is a long way off.
Understandably, consumers want their medications dirt cheap. But if generic drug companies can’t afford to manufacture, all that may remain is dirt.
(First published 6/11/18)