WASHINGTON, DC (September 19, 2017) – Access to safe, affordable generic medication is a critical lifeline to millions of patients, with individuals and families receiving coverage under Medicaid coverage saw their prescription drug costs reduced by $512 on average last year.
Yet a new penalty has been imposed on generic manufacturers participating in the Medicaid program for generic medicines. Newly released analysis from Bates-White Consulting concludes the CPI penalty “will not only have little effect on generic prices, but it will also have the unanticipated and unintended consequence of increasing the likelihood of shortages for generic medicines.”
Modeled on a fundamentally different market, the CPI penalty, for example, does not take into account changes in the price of active pharmaceutical ingredients used to make generic drugs, which often fluctuate due to normal market conditions and are outside the control of manufacturers.
Moreover, the CPI penalty inappropriately uses the average manufacturer price (AMP) – a sometimes volatile barometer – which does not adequately reflect manufacturer behavior, and can instead often reflect changes among purchasers.
By ignoring the differences and highly competitive nature of the generic drug market, unfairly penalizing manufacturers for price fluctuations outside of their control and increasing the risk of drug shortages, the CPI penalty ultimately threatens the availability of low-cost generics to patients. “Generic drugs drive savings to Medicaid and increase access to safe, affordable medicines for millions of individuals and families,” says Association for Accessible Medicines Chester “Chip” Davis, Jr. “Congress should immediately repeal the CPI penalty on Medicaid generic drugs.”