Regulate Generics Like Utilities, Goldman Urges Panel

Schaeffer Center Director Dana Goldman told a California Senate committee Thursday (9-29) that the furor over generic drug price hikes should be channeled toward regulatory solutions that would ensure “safe and reliable” supplies while keeping pharmaceutical companies incentivized to develop new cures.

Appearing before a Senate Committee on Health informational hearing at the Los Angeles Law Library, Goldman noted that pharmaceuticals account for only 12 percent of total health care spending while providing a first line of defense against disease.

Generics are 88 percent of all prescriptions, but only 28 percent of drug costs, and average generic prices have fallen 60 percent over the last five years, he said. However, about 300 of these had what the Government Accountability Office termed “extraordinary price increases.”

Those increases should prompt regulation of generic drugs in the same manner as electricity, Goldman said.

The California Public Utilities Commission “serves the public by ensuring safe, reliable” delivery of an essential service at prices that are transparent.  “We need that same model for generics,” he said.

The hearing focused on the dramatic price increases for Mylan’s lifesaving EpiPen, which uses generic epinephrine in an auto-injector to counter anaphylaxis shock.  The retail price of an EpiPen two pack soared from $100 in 2009 to over $600 this year.

During that time “there were opportunities to ensure competition in the market,” Goldman said.  Mylan’s market dominance, which enabled the company to raise prices, is ultimately a failure of regulation, he said.

At the same time, “we want to make sure we reward the innovators” who are developing medicines that either cure diseases or transform them from death sentences to chronic conditions.

“We have remarkable innovators” in California who are working on cancer and Alzheimer’s treatments, among others, Goldman said.  Very high initial prices for curative branded drugs can reflect a company’s realization that ending a disease will also end its business.

“The time is ripe to strike a deal with innovative companies” which would align price with value, he said.   Instead of the state paying large upfront costs, it could work with the companies to deliver the drugs now at much lower prices, and share in the huge savings in medical costs such drugs will create over time.

Committee chairman Sen. Ed Hernandez (D–West Covina) said he was willing to engage in such conversations, but was skeptical about industry intentions.   “They are making plenty of money right now,” he said.  When he broached a similar idea at a meeting that included pharmaceutical companies, “all I could hear was crickets,” he said.

Hernandez charged that Mylan was trying to mitigate public outrage over the EpiPen price hikes by offering coupons to consumers to help cover their deductibles or co-pays.   He noted that insurance companies and government payers have to pick up the vast bulk of the charges, which result in higher premiums for consumers down the line. “These increases cannot be sustained,” he said.

Consumer advocates at the hearing repeatedly stressed the importance of EpiPen to survival of children hit with shock from food allergies.  For some families with low incomes, the price increases have meant choices between rent and medicine.

“Without it, you are definitely at risk,” said Kendall Hollinger, 19, who is allergic to nuts and said she has used an EpiPen 8 times.   The first time was when she was 5, and her airway was closing.  “I remember saying, ‘please Mommy, don’t let me die.”

The advocates said the price hikes hit hard because they need multiple sets for home, school, and travel.  Once the need for an injection “is evident, “there is no time to wait,” said Hollinger’s mother Kim.

Mylan was invited to send a representative to the hearing but declined.  In addition to Hernandez, committee members Isadore Hall III (D-San Pedro) and Holly J. Mitchell (D-Los Angeles) attended.