D.C. lawmakers probe rising generic prescription-drug prices

On the heels of the introduction in Congress of legislation aimed at controlling rising prescription drug prices, federal prosecutors have launched an investigation into generic price increases of pharmaceuticals.

Despite this, Cardinal Health Chief Financial Officer Michael Kaufmann told financial analysts in New York that generic price inflation would continue, even as the rate of increase has eased in recent months.

Kaufmann said corporate takeovers in the generic prescription drug industry had led to a decrease in the number of manufacturers, so fewer firms were competing for sales, decreasing pressure to control rising prices.

A recent report by the Philadelphia Inquirer said that because wholesale distributors take a portion of drug prices, higher prices mean they take a larger cut. Kaufmann said Cardinal representatives "focus every day" on the prices of generic drugs because they have to get the highest possible profit margins.

Kaufmann spoke on the subject at the recent Morgan Stanley Global Healthcare Conference.

"All those environmental factors that we believe have been a part of generating price increases over the last several years are still out there," Kaufmann told the Inquirer. "The only one that's new that I would say is a little bit on the opposite side is the hearings in Washington.

"If I'm a CEO of a generic company, and I'm being called to Washington to talk about my price increases, that might give me a little bit of pause around taking price increases," Kaufmann said. "Again, if you're a CEO and you have to deliver your numbers to your shareholders . . . it's a marketplace where you're still going to see generic inflation being a component of what's going on in our margins."

Democratic presidential hopeful U.S. Sen. Bernie Sanders (I-VT) and U.S. Rep. Elijah  Cummings (D-MD) scheduled hearings to discuss generic prescription drug price hikes, and the duo recently unveiled a bill concerning what Sanders said were "skyrocketing" drug prices. Sanders referred to a study done by the Centers for Medicare and Medicaid Services (CMS) that indicated overall prices of generic prescription drugs shot up 12 percent in 2014.

So far, the bill has no Republican co-sponsors.

"Americans should not have to live in fear that they will go bankrupt if they get sick," Sanders said in a statement. "People should not have to go without the medication they need just because their elected officials aren't willing to challenge the drug and health-care industry lobby. The pharmaceutical industry spent nearly $230 million on lobbying last year, some $65 million more than any other industry, and employed over 1,400 registered lobbyists."

Sanders and Cummings sent letters to 14 companies (12 with headquarters or operations in Pennsylvania or New Jersey), asking their leaders to explain the reasons for price hikes on certain drugs.

Some of those hikes were more than 10-fold boosts in prices.

The matter is being investigated by a Philadelphia grand jury, and subpoenas have been sent to generic drugmakers, including Lannett and Allergan.

"You just don't hear much talk about $4 generics anymore, which we think is a good thing because we have very high quality and predictability requirements from our suppliers, and that's one of the key areas that our customers look to us for," generic drug wholesaler AmerisourceBergen's CEO, Steven Collis, said. "They don't want ever to be out of product, and our fulfill rates on generics are going up all the time."