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Study finds older drugs responsible for surging prescription costs

Researchers say drug companies raise prices because they can in many cases

Photo (c) Charles Wollertz - Getty Images
In 2015, Turing Pharmaceuticals became the target of public rage when it purchased an old drug, Daraprim, and immediately raised the price of the drug from $13.50 a tablet to $750 a pill.

It turns out that might not have been an isolated example.

Researchers at the University of Pittsburgh found that new drugs entering the market do tend to push the average cost of a prescription higher, but drug companies are also hiking the price of older medications.

In fact, in their study published in the January issue of Health Affairs, the researchers suggest older, existing drugs account for most of the overall increase in the cost of prescription drugs.

“It makes sense to pay more for new drugs because sometimes new drugs are more effective, safer or treat a new disease you didn’t have a treatment for,” said Inmaculada Hernandez, Ph.D., an assistant professor at Pitt and lead author of the study. “But the high year-over-year increases in costs of existing products do not reflect improved value.”

Same drug, higher price

In other words, consumers are paying more for drugs -- sometimes a lot more -- but it’s the same drug as before. It hasn’t changed and it’s not in any way “new and improved.”

The researchers found these existing drugs increased in price about 9 percent each year, nearly five times the rate of inflation. The price of brand name injectables rose nearly twice as much.

A case in point is Sanofi’s Lantus brand insulin, which had increased in price by 49 percent in 2014. At the time, Lantus had been on the market for more than a decade.

“These types of insulin have been around for a while,” Hernandez said. “Whereas the original patent for Lantus expired in 2015, dozens of secondary patents prevent competition, and it is this lack of competition that allows manufacturers to keep increasing prices much faster than inflation.”

Looking out for shareholders

Another factor may also be at work. Last year, Nirmal Mulye, CEO of a small pharmaceutical company called Nostrum, raised eyebrows when he defended his company's decision to raise the price of nitrofurantoin from $474.75 to $2,392. Nitrofurantoin is a drug that is highly effective at treating lower urinary tract infections.

In an interview with the Financial Times, Mulye noted that one of his competitors had just raised the price on a similar drug by a similar amount.

“I think it is a moral requirement to make money when you can . . . to sell the product for the highest price,” Mulye told the publication.

The price of prescription medication is one issue on which both Democrats and the White House may find common ground. Then-candidate Donald Trump was vocal in his criticism of drug companies during the 2016 presidential campaign, and he has continued to call out individual pharmaceutical companies during his presidency.

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