Mylan CEO Heather Bresch urges companies footing the bill foremployee health costs to examine the instances in which plansaren't steering patients toward the cheapest available treatments.(Image: Shutterstock)

Generic drugmakers are being crushed by thevery forces that the Trump administration iscounting on to drive down prescription costs.

While policy makers are betting that opening the market to adeluge of new medicines and reforming the drug supply chain will helpcontain rising prices, many widely used copycat medications arealready seeing their prices fall at such a rapid rate that theirmakers are struggling to keep their heads above water.

Related: The best fix for drug prices is already on thebooks

As a result, companies including Mylan NV and Perrigo Co. arebeing forced to consider shakeups. Mylan's board said this weekthat it would consider radical changes to its business, whilePerrigo said it would separate its generic business.

Both Mylan and Perrigo had been wagering that manufacturing new,cheaper alternatives to pricey complex treatments for cancer,arthritis and other diseases would help to offset the broader painfacing generic-drug firms. But the companies have encounteredsizable hurdles in bringing them to market, including regulatorysnags and legal battles over patents.

Meanwhile, rattled investors have fled. Perrigo shares havefallen 19 percent so far this year — including a decline of morethan 10 percent on Thursday — while Mylan shares have dropped morethan 12 percent in 2018, trailing the nearly 5 percent gain for theS&P 500 pharmaceutical subindex.

Formulary friction

Facing the dropoff in prices of simpler medications, Mylan hasattempted to bring lower-priced versions of the expensive multiplesclerosis drug Copaxone to market. Mylan's drug was approved afterdelays, but it has yet to make a major dent in the market. Thecompany blames pharmacy-benefit managers, middlemen who negotiatedrug costs for health plans, for not always steering patients toless-expensive alternatives.

Mylan Chief Executive Officer Heather Bresch, on a conferencecall with investors Wednesday, urged companies footing the bill foremployee health costs to examine the instances in which plansaren't steering patients toward the cheapest availabletreatments.

“I would like to call to action that the C-suite in corporationsaround the United States be looking at those formulary tiers,”Bresch said, referring to the lists of preferred medicines kept bybenefit managers.

After Mylan cut the price of its version of Copaxone by 60percent, Bresch said some plans still favored the higher-pricedbrand-name drug. She called that example “representative of theperverse incentive embedded in the current system.” Many drugmakershave decried the rebates, which can sway decisions about whichdrugs are used and which aren't.

“The business of health care feeds on higher prices,” shesaid.

For Perrigo, simply getting its version of inhaler ProAirapproved by U.S. regulators has been a problem. The drugmaker hassaid it no longer expects to launch its lower-priced version in thefourth quarter as it works through the regulatory process.

Favoring brands

Patent fights have also kept competitors for some high-pricedbiologic drugs off the market. Just four of the 12 approvedbiologic copycat drugs are actually being sold, according to thegeneric-drug industry group the Association for AffordableMedicines, despite a push by the U.S. Food and Drug Administrationto approve more such medications.

Even when copycats reach the pharmacy, drug plans have beenaccused of favoring the more expensive brand names. Pfizer Inc.sued rival Johnson & Johnson last year, alleging that itscheaper version of J&J's rheumatoid arthritis drug Remicadehasn't had a fair shot because J&J has used the formularysystem to push its drug. J&J has said the suit is withoutmerit.

The Trump administration has focused on formularies and rebatesin its efforts to contain drug costs, proposing changes toantikickback rules and other regulatory steps to increasetransparency.

In the meantime, the middlemen are gaining muscle. Just fourgroups controlled 90 percent of generic-drug buying in 2017 in theU.S., according to Adam Fein, chief executive officer of consultantDrug Channels Institute — and two have plans to join forces, likelygiving them even greater leverage.

— With assistance by Jared S Hopkins