Generic drugs were first introduced to the American public in 1984 with the Drug Price Competition and Patent Term Restoration Act. The law took control of the pharmaceutical industry away from the big drug makers in the interest of stoking competition. These companies could enjoy the profits they earned until their patents expired — this made up for the cost of development and marketing — and then generic versions of the drug would be released to the marketplace. As a result of skipping the development and marketing, generic drug prices were lower, and by competing with brand names, they kept all prices as low as possible. That’s not the case anymore; generic drugs are getting more expensive than they ever were, forcing a Senate subcommittee to investigate.

In a commentary published in The New England Journal of Medicine, Aaron Kesselheim, director of the Program on Regulation, Therapeutics, and Law at Brigham and Young Women’s Hospital, points to a market failure with regards to competition that’s causing generic drug prices to go higher. Drug shortages, supply disruptions, and “consolidations within the generic-drug industry,” may have all played a part in these increases, he and his colleagues wrote. It makes sense, as troubling as it is. After all, markets where competition is too high, or where demand is too low, are likely to see fewer companies trying to sell their drugs. Thus, generic drug companies obtain a legal monopoly on the region, and increase prices.

Kesselheim’s findings — that prices of heart drug captopril, for example, rose 2,800 percent, from 1.4 cents to 39.9 cents per pill, within a year — sparked a call for a hearing from the Senate Subcommittee on Primary Health and Aging on Thursday. During the hearing, over 1,200 generic drugs were identified as being priced higher than ever, amounting to a 488 percent collective increase. These drugs included albuterol sulfate, a popular asthma drug, that rose from $11 to $434 per two tablets between October 2013 and April 2014, and the antibiotic doxycycline hyclate, which went from $20 to $1,849 per bottle during the same time.

“We’ve got to get to the bottom of these enormous price increases,” said subcommittee Chairman Bernie Sanders (I-Vt.), according to The Philadelphia Inquirer. “It is unacceptable that Americans pay by far the highest prices in the world for prescription drugs. Generic drugs were meant to help make medications affordable for the millions of Americans who rely on prescriptions to manage their health needs, and now some of them are becoming unaffordable.”

Hoping to alleviate this strain on the consumer, Sanders proposed a bill that would require generic drug companies to give rebates to Medicaid if the price of their drugs increase faster than inflation — brand name pharmaceutical companies already do this. It seems, however, that the generic drug companies, all three of which declined to attend the hearing, oppose any type of legislation. “In actuality, generic drugs continue to be a resounding success in lowering health care costs and benefiting patients,” said Ralph Neas, CEO of Generic Pharmaceutical Association, according to ABC News.

Also noting that generic drugs saved patients about $239 billion in 2013, generic drugs are an overall success. Instead of regulation, he suggested coaxing the marketplace to become more competitive, as well as quickening the Food and Drug Administration's (FDA’s) review process for drug applications — something Kesselheim also supports. “These regulatory issues have been around for a very long time, and this is a new issue, so I can’t see how this is a regulatory issue,” he said, according to ABC. “I think we all want high-quality, safe drugs, and we want the FDA to monitor the safety of our drug supply. … I see this as a market failure, and a bunch of individual market failures in some cases.”

Today, nearly eight out of 10 people use generic prescription drugs in hopes of avoiding the exorbitant costs of their more popular, brand name versions. Studies have shown that patients are more inclined to stick to a drug regimen if they’re using cheaper, generic versions. Therefore, it’s important we figure these issues out to keep drug prices down.

Source: Alpern J, Stauffer W, Kesselheim A. High-Cost Generic Drugs — Implications for Patients and Policymakers. New England Journal of Medicine. 2014.