Soaring Ointment Prices Are a Dermatologic Mystery

They are the staples of most dermatology practices: generic creams and ointments that treat everything from skin rashes to athletes foot to scabies. Many doctors prescribe the drugs without a second thought. But increasingly, some dermatologists say, patients are complaining about a recent, mysterious and rapid rise in price.

Take betamethasone dipropionate, a cream used to relieve itchy skin. In 2008, a tube cost $18.17. The medicine now costs $71.28, according to Red Book, which tracks wholesale drug prices. Permethrin cream, which kills scabies mites, cost $29.25 in 2008 but has jumped to $71.08 today.

The hefty price increases have stumped doctors and their patients. It seems to me that something is going on, but I dont have quantitative details, said Dr. Steven R. Feldman, a professor of dermatology at Wake Forest Baptist Medical Center in Winston-Salem, N.C. I wouldnt have thought that these old-timey, generic drugs would be very costly.

The added revenue from the higher prices has improved the bottom lines of the handful of companies that make such drugs, and has even figured into a contested buyout of one of the companies by an India-based drug maker, Sun Pharmaceuticals.

The phenomenon offers a window into the murky and often illogical world of drug pricing, where prices are not always driven by the usual rules of supply and demand. In most markets, basic economics would say the lower the price, the higher the volume, said Les Funtleyder, the health care fund manager for Poliwogg, a private equity and hedge fund. But health care isnt one of those standard markets.

Other than pharmacy benefit managers, which manage prescription drug plans, few other players in the health care market make decisions based on cost, said Mr. Funtleyder. When doctors write a prescription, they often fail to consider the price of the drug. And since many patients have prescription drug coverage, they also often ignore the cost. The situation can create a lucrative opening for some companies, especially in a low-profile corner of the industry like dermatology, where price increases might not attract broader notice.

You might have a lot of itchy people, but people can go around and manage O.K. Mr. Funtleyder said. A rash is not a public health emergency.

Even so, some doctors said the prices were unacceptable. Patients complain about it at every office visit, said Dr. Mark G. Lebwohl, chairman of the National Psoriasis Foundations medical board and of dermatology at Mount Sinai Medical Center in Manhattan. I think its outrageous that the cost of a generic cream or any cream exceeds the cost of a doctors office visit.

Most generic creams and ointments in the United States are made by three companies: Perrigo, Taro and Fougera, which was recently acquired by Sandoz, the generics division of Novartis. It is a specialized business, requiring both the right equipment and expertise. Before getting clearance to make a drug, the companies must demonstrate to the Food and Drug Administration that their creams are absorbed through the skin in the same quantities as the brand-name drugs, a more difficult task than proving that a generic pill is equivalent.

Its much more time-consuming and expensive to get these drugs approved, said Brian Sheehy, managing partner of IsZo Capital, a minority shareholder in Taro, who said that increased scrutiny of manufacturing practices by the F.D.A. had raised costs and forced some companies to stop making certain drugs. So even if prices increase, its still not worth anyones time to supply the market.

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Soaring Ointment Prices Are a Dermatologic Mystery