Report: Big price hikes on old drugs costing Medicaid

Some old drugs are getting new prices, big ones. (Photo Dreamstime)

Some old drugs are getting new prices, big ones. (Photo Dreamstime)

Pharmaceutical companies are raising the price of drugs so much that Medicaid spent as much as $3.2 billion extra in 2016 just to pay for those higher prices, a new report found.

Medicaid is a state-federal health care program that serves the poor, the elderly and the disabled.

It's no secret that drug companies charge a mint for some new inventions, in part to recoup the cost of research and development. But a report this week by Kaiser Health News and the Daily Beast found that the companies are also hiking the price of decades-old drugs, by amounts that dwarf inflation.

The report looked at the difference between what a drug cost per unit in 2015 and how much it cost a year later. Then it calculated how much of the 2016 outlay from Medicaid was just due to increased cost; it called that the “extra” cost.

Some old drugs that became much more expensive included those used to treat ear infections, psychosis, cancer and other ailments:

  • The cost of an antipsychotic drug approved in 1988 to treat schizophrenia, Fluphenazine hydrochloride, rose 347 percent in 2016. That added up to an extra $8.5 million Medicaid paid in 2016, the report found.
  • Depo-Provera was first approved in 1960 as a cancer drug and is often used now as birth control. Its price more than doubled in 2016. That cost Medicaid an extra $4.5 million.
  • Potassium phosphates — on the market since the 1980s and used for kidney failure patients, preemies and patients undergoing chemotherapy — jumped 290 percent on average in 2016. That cost Medicaid an extra $1.8 million that year.

One pharmacy industry researcher explained that there was a shortage of potassium phosphates after a manufacturer shut down, contributing to that price hike.

The Kaiser report said that there’s a cycle of pricing linked to whether there’s competition or a monopoly. Prices are higher when a company first develops a drug and has a monopoly. Then if a lot of generics come in, the price will generally drop. But if the price gets too low the competition can lose interest and go away again — and the remaining companies or company can charge more.

The price hikes are ultimately borne by the taxpayers who fund Medicaid. The report added that "those costs eat 'into states' ability to pay for other stuff that matters to [every] resident,' said economist Rena Conti, a professor at the University of Chicago.