Fighting Generic Drug Price Gouging

For the most part, there is an assumption that generic drugs are cheap, but according to Karim Meeran, professor of endocrinology at Imperial College Healthcare NHS Trust, Charing Cross Hospital, London, you’d be surprised at how much generic drugs cost – even those that have been available for years.

In a letter to the BMJ (1), Meeran, and his co authors, Sirazum M Choudhury and John Wass, discuss the scandal of generic drug pricing and suggest a radical shake up – developing an arm’s length NHS organization to manufacture essential, generic drugs. “This would enable the NHS itself to set the market price for generic drugs. Such a company could be run as a non-profit making NHS Trust with the aim of making generic drugs at cost prices, setting prices to ensure solvency, and ploughing profits back to getting approval for other generics,” the authors write.

We caught up with Meeran to learn more.

What prompted you to write the letter?

I have been shocked by the huge increase in the price of hydrocortisone (used to treat adrenal insufficiency) over the last 8 years. I put this into an editorial in 2014 (2), which in turn generated a rapid response from a hydrocortisone manufacturer when I suggested that patients could all switch to prednisolone (3), which is very similar, but significantly cheaper (£4 instead of £90 per month). Since writing that editorial in 2014, I have been switching patients from hydrocortisone to prednisolone, and have developed an assay for prednisolone to enable such a switch to occur. The development costs of the assay have been more than offset by the savings of not using hydrocortisone as a first line glucocorticoid replacement. We have been conducting research to confirm that prednisolone is as safe as hydrocortisone and in fact we have found that prednisolone is in fact better and safer provided the correct dose is used (4).

The pharma industry has an important role to develop new drugs, and there is indeed risk taken on when embarking on new developments. The degree to which innovation and research is undertaken, however, varies – and some companies have no intention of innovating at all and are simply price gouging. The price of hydrocortisone in the UK today is now 12000 percent higher than in 2008 – interestingly, this isn’t the case in the rest of Europe, where the drug remains cheap.

What are the challenges facing the NHS?

In the UK, it’s impossible to avoid hearing, seeing and reading about the challenges facing the NHS. For many parts of the service, there is a risk of care being seriously compromised because of lack of funds. Some pharma companies are clearly taking advantage of the fact that they can charge what they like for essential medicines, and this compounds the problem. In the UK, individual hospitals have a budget so when the price of an essential drug goes up, such as hydrocortisone, it’s a big problem and influences spend on other drugs. At the Charing Cross and Imperial College Healthcare NHS Trust, we have handled the price increases of hydrocortisone by using a cheaper drug, but this is only because we have a research interest in the different glucocorticoids available. Many hospitals are being pushed to the limits because of cost increases of a number of generically available drugs.

Because the NHS is so busy trying to cope with everyday business, no one has a strategic overview of drug prices. The setting of the drug tariff (the amount the NHS will spend on drugs) is another area that no one seems to understand.

Your argument for the NHS manufacturing generic drugs in-house has garnered a lot of interest. How exactly would it work?

There are several possibilities. One is for the Department of Health, or NHS England, to invest in building a plant somewhere in the UK. This will require capital investment. There is a World Health Organization list of essential drugs that should be available to any person in any healthcare system. Any drug on the list that is overpriced, such as hydrocortison should be made in the proposed plant.

An alternative is for the pharma industry itself to do this. They already have the infrastructure, and if they make all the drugs on the list at cost price for the NHS, and other healthcare systems, it would be a sensible way forward. I think this is a real chance for industry and a conglomerate of industry (such as the British Generic Manufacturers Association or the Association of the British Pharmaceutical Industry, together with the Department of Health ) to join the NHS for the greater good. The Department of Health would have to agree with the ABPI or BGMA what a “reasonable return” on investment with a guaranteed NHS market is.

Creating a specialist body – as what happened with the UK’s cost watchdog, the National Institute for Health and Care Excellence (NICE) – that had the authority to review prices and set the drug tariff in an open way could be another way forward.

What would be the main challenges?

The biggest problem is that the Department of Health is too busy trying to run the NHS to actually spend time sorting out this problem… Turning these ideas into action requires will, capital, time to get the MHRA to agree to license the drugs made in the UK, someone to set the drug tariff, and all with the authority of a government, that frankly has bigger worries right now. The MHRA have an excellent safety record, but I feel they have made licensing very difficult. Even a simple drug, such as hydrocortisone, is very difficult to get licensed.

What more do you think should be done to limit price gouging?

I remain optimistic that an industry group, such as the ABPI, could regulate prices, but that isn’t currently one of their aims – and I believe it should be. Tactics such as making a drug difficult to obtain, and then putting prices up should be prevented by the ABPI. For example, recently Synacthen – used to test for adrenal insufficiency – became difficult to obtain in the UK. For many years, it was available for around £2.70 for a 250mcg vial (BNF 2011) – manufactured by Questcor. It then became unavailable in 2016 and we were advised by pharmacy to limit its use. It is now available again, but at a cost of £45.71 for the same vial from Mallinckrodt, which acquired Questcor in 2014.

A few other changes were made to the drug too, such as posology, which could be because Mallinkrodt are now launching the drug for gout. However, this should not make it more expensive – and given that it’s such an important drug, there shouldn’t have been a shortage in the first place.

I am an endocrinologist so hydrocortisone and Synacthen are important for me, but there are probably many other drugs that I don’t know about that have been subject to price hikes. In addition, doctors generally do not know the cost of these old drugs and continue to prescribe, unaware of the price change.

Recently Pfizer was fine £84.2 million for overpricing Phenytoin, another essential generic drug. The fine however was not because of the overpricing, but because the company had breached competition law. Whenever there is an unreasonable price, I would like to see the ABPI investigate.

Currently, there is virtually no competition in the generic drug market. There are plenty of different generic drugs, and each company will have their own portfolio. Why would a second company set out to compete on a particular drug when it would cause prices to fall? The NHS could form that second company.

Some argue that high drug prices are the cost of drug development – how would you respond?

Patents work to appropriately reward any company that truly innovates. Developing new drugs has helped humans survive well for many years. The main drugs that changed the course of history were antibiotics and glucocorticoids in the 1940s. Hydrocortisone is one of those very old drugs. Newer steroids are being developed, and some of these can call for a higher price if they are a true advance. However industry often cheats the system, and relaunches an old drug with a new name – for example, enantiomers of the original. It is a way to maintain high prices. As an example, Plenadren was launched in the UK in 2012. The drug has received “orphan status” from the MHRA and is marketed at over £400 per month. It is a modified release hydrocortisone. Given that hydrocortisone has been available for years, it is surprising that it has received orphan status.

I would like to call upon industry groups, regulators and governments to come up with suggestions to prevent the unreasonable price gouging of generics. Drug development should continue to be rewarded with patents, but generic drugs, by their very nature of being generic, should be sold cheaply.