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Drug Prices

This is the FDA’s Problem

Here’s an article at JAMA that addresses the problem of off-patent (generic) medications in the US: they’ve traditionally been the cheapest in the industrialized world, but in recent years have been rising in price. And often spectacularly, ridiculously so.

The area of concern has been the off-patent drug market with limited or no competition. Although markets for some drugs remain vigorous long after patent expiration—for example, the amoxicillin market includes at least 10 different manufacturers—many other older medications are produced by only 1 or 2 manufacturers. A consequence has been an increasing frequency of drug shortages, as manufacturing problems at a single facility can quickly interrupt the national supply of a drug. Reduced competition has also led to a different kind of access problem. Several pharmaceutical companies have developed a novel business strategy of dominating noncompetitive markets for older drugs and then increasing the price substantially.

This is of a piece with the headlines a few years ago about shortages of cancer drugs – the ones in question were invariably older generics. In those cases, and in the current ones, the problem eventually becomes largely a regulatory issue, because the FDA, as it now operates, cannot help but generate and/or perpetuate shortages and price increases (emphasis mine below):

In a competitive market, when a price is too high, another manufacturer could begin to produce and offer the product at a lower price. However, because there is an approval process to ensure bioequivalence and quality manufacturing, this self-correction can happen only at the speed of FDA review. FDA is now working on reducing a massive backlog of thousands of generic applications from prior to 2013. The agency’s fiscal year 2014 performance report noted that none of the approximately 1500 applications for generic drugs submitted in fiscal year 2014 had been approved by the end of that year. Even with greater resources as a result of the Generic Drug User Fee Act, FDA will still take years to review these applications.

Exactly so. And the agency has made this problem worse (in my opinion) by offering market exclusivity for older drugs on too-generous terms. Combine that with glacial review of competing generic drug applications (or worse, applications that never even get made because it’s obviously not going to be worth the trouble), and you get the situation we have now, which is one that nobody wants and nobody needs. Well, if you’re one of the people fearlessly raising the prices on a drug from 1957 or something, you’re probably enjoying it. But no one else is.

The authors aren’t calling for the entire generic review process to be torn down (and who knows how long that would take and what would replace it?) Rather, they’re asking the agency to at least prioritize its generic review pile, and go after the most critical situations first:

Current policy already permits the agency to move up in the queue applications for generic drugs that “could help mitigate or resolve a drug shortage and prevent future shortages.” FDA should recognize that addressing monopolistic conditions that give rise to sudden price hikes is a means to “prevent future shortages.” If FDA perceives such a determination, which includes economic factors, to be outside of its usual area of expertise, the task of identifying applications to prioritize could fall to a different part of HHS, such as the Office of the Assistant Secretary for Planning and Evaluation.

Somebody needs to step up. As it is, we have a regulatory logjam that’s allowing a formerly functional generic drug system to become more and more deranged. There is no reason whatsoever for any decades-old drug to suddenly find itself invulnerable to price competition. We have two drug regimes in this country – expensive patented compounds (the reward for those who took the risk to bring them to market) which then, after a set patent period, turn into cheaper, derisked generics. This system makes a lot of sense, but the second part of it is slowly falling apart, and it’s falling apart largely because of the FDA’s own actions (and inactions).