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Drug Companies Stall on Generic Drug Releases

February 26, 2020

The U.S. Food & Drug Administration has approved generic versions of pharmaceutical products at a record-setting pace since 2016, but few of the newly certified products are available to patients, according to an analysis by Iqvia.

Iqvia is a multinational company that uses data analytics to study health care and recommend new avenues of research. According to its study, cited in a November 19 Wall Street Journal article, fewer than two-thirds of newly-approved generic drugs are actually available for use by patients.

In addition to logistical or financial challenges faced by producers, the report identified a potential cause of the delay between market approval and market availability: evergreening.

“Evergreening” is a practice among pharmaceutical companies “to obtain a second patent before the first one expires,” according to the book, Overcharged, Why Americans Pay Too Much for Health Care, co-authored by Charles Silver and David Hyman. “Drug companies can obtain these secondary patents by tweaking their drugs in various ways,” the book states.

Keeping Competitors Out

Evergreening is an issue for the industry, says Karin Hessler, assistant general counsel with the Association for Accessible Medicines, an organization representing the interests of generic drug manufacturers and distributors. 

“Competition is ultimately good and results in lower drug prices,” Hessler said.  “Obviously, if there is no generic competition and it’s just the brand product at the brand price point, patients will pay higher prices for a longer period of time.”

Hessler says one thing that can help free the market is not letting government get in the way of legal settlements in patent cases. To settle claims against their patents (as in the case of evergreening), brand name drug companies sometimes offer generic drug manufacturer money not to produce the drug over an agreed upon period of time. 

“If settling became difficult, it would be left to generic and biosimilar companies to try to defeat every brand patent there is and that would be a high burden to us,” Hessler said. “Settlements are frequently necessary because companies can’t spend all of their time and money in court fighting patent disputes. Settlements have a beneficial impact.”

Why No Outrage

Evergreening is a symptom of a larger problem—a health care system that is expensive and ineffective, says Silver, who is also a law professor at the University of Texas at Austin School of Law and an adjunct scholar with the CATO Institute.   

“Health care costs too much because we pay for it the wrong way,” Silver said. “We rely on third-party payers—Medicare, Medicaid, and private insurers—to cover the cost of goods and services that we should purchase directly. Third-party payers don’t care about costs nearly as much as consumers do.”

Silver says a December 19, 2019 ProPublica article, “What Happens When a Health Plan Has Not Limits? An Acupuncturist Earns $677 a Session,” provides an excellent argument. 

“People should use insurance to cover catastrophes, not to pay for things like routine visits to doctors, blood tests, imaging studies, and so forth,” Silver said.

Another factor inflating prices is government’s role in treatment and compensation to providers such as drug manufacturers. Silver says a December 20, 2019 Washington Post article on the omnibus spending bill describes it well. 

“Pharmaceutical companies, hospitals, insurance companies and medical device manufacturers practically ran the table in Congress, winning hundreds of billions of dollars in tax breaks and other gifts through old fashioned lobbying, re-exerting their political prowess,” the article stated.  

“It is simply impossible for Congress to resist pressure from special interests to spend more. That’s why Senators Bernie Sanders and Elizabeth Warren who think Medicare for All will save money are crazy,” Silver said. “If Medicare for All is enacted, spending will go through the roof.”

Not Just Price at the Counter

The costs patients pay for reduced competition are too numerous to count, Silver says. 

“The health care industry is soaking up the raises that workers receive,” Silver said.  “It is impoverishing people by saddling them with bills they cannot afford. The compensation system is creating conflicts between the interests of providers and the interests of patients. When providers are paid on the basis of volume without regard to quality, they over-treat and under-serve.”

 By using health insurance as a payment program, it can impact all areas of life, Silver says. 

“The payment system is preventing people from saving for their retirements, from investing in social determinants of health—housing, education, and food—that generate more bang-for-the-buck than medical treatments, and it is destroying the ethic of self-reliance that is the backbone of a successful society,” Silver said.

Fixing the Larger Problem

To increase competition in the prescription drug market, Silver says it’s important to attack the larger problem. 

“Lawmakers should eliminate or reduce tax incentives to purchase insurance, including the exclusion for insurance purchased through employers,” Silver said.

Consumers should also be able to make more individual health care decisions, Silver says. 

“They should eliminate the Veterans Administration medical system and let veterans buy treatments from ordinary providers,” Silver said. “They should replace Medicare and Medicaid with cash transfer programs that enable people to shop for what they want and to buy catastrophic coverage. The faster the system shifts from third party payment to first party payment, the sooner prices and spending will fall.”

 

Jesse Hathaway (think@heartland.orgis a policy advisor to The Heartland Institute. 

           

Author
Jesse Hathaway is a policy advisor for budget and tax issues at The Heartland Institute.
media@heartland.org @JesseinOH