Legislation introduced in the US House and Senate would close a current legal loophole which exempts generic drugmakers from paying a rebate to Medicaid if their products’ prices increase faster than inflation.

Current law requires branded drugmakers to pay such a rebate when their prices increase above inflation levels, and the Congressional Budget Office (CBO) estimates that extending this provision to generics makers, through the Medicaid Generic Drug Fairness Act, would save US taxpayers $500 million over 10 years, say the bill’s sponsors, Independent Bernie Sanders in the Senate and Democrat Elijah Cummings in the House.

They introduced their bills following a Congressional hearing held to examine the reasons behind the “skyrocketing” price rises seen for some generics. 50% of generic drugs’ prices rose from July 2013 to July 1014, and about 10% more doubled in cost during the period, according to an analysis of government data.

For example, the price of digoxin, used for congestive heart failure, rose from $0.12 a pill to $1.06 during the period, while the price of migraine medication Divalproex Sodium ER soaredfrom $0.27 to $2.38, said Sen Saunders, who chairs the Senate subcommittee on primary health and aging. 

“This is greed at work in the pharmaceutical industry. It is unacceptable that Americans pay by far the highest prices in the world for prescription drugs,” said Sen Sanders, while Rep Cummings told the hearing that “some companies are exploiting monopolies and disruptions in supply to implement massive price increases in order to reap unconscionable profits.”

But industry group the Generic Pharmaceutical Association (GPhA) says the proposed legislation “misses the forest for the trees.” Generics saved US taxpayers $239 billion in 2013, 14% more than in 2012, and while the prices of branded drugs have almost doubled since 2008, generics’ prices have been cut roughly in half, said the GPhA’s president and CEO, Ralph Neas.

“The proposed bill reflects a basic misunderstanding of the pharmaceutical marketplace, and attempts to impose brand pharmaceutical provisions on generic drugs. This effort is misguided and will threaten patient access to affordable medicines,” he said.

Mr Neas called instead for timely review of the more than 3,000 generic drug applications that have been filed with the Food and Drug Administration (FDA), plus increased congressional scrutiny of the “misuse of safety programmes designed to protect patients that are instead being used to thwart competition from generics.”

- The chief executives of three drugmakers asked to testify at the Senate panel hearing – Marathon Pharmaceuticals, Lannett Co and Teva Pharmaceutical Industries – refused to do so, the legislators report.