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FDA Policies Are Needlessly Driving Up Costs of Generic Drugs

May 25, 2015

Consumers increasingly report sticker shock as generic drugs sold for decades have suddenly become scarce and expensive. Sometimes generic drug prices skyrocket due to aging equipment.

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Consumers increasingly report sticker shock as generic drugs sold for decades have suddenly become scarce and expensive.

Sometimes generic drug prices skyrocket due to aging equipment. Old drugs are often made on aging production lines, which are sometimes shut down for maintenance or stopped after the manufacturer is warned by the U.S. Food and Drug Administration (FDA) that the facility is out of compliance with current good manufacturing practices.

Another reason drug prices rise is when one of the few remaining suppliers ceases production and retools to make newer, more profitable drugs. After a manufacturer leaves the market, it can take many months for FDA to approve a new firm applying to enter.

“The FDA is partially responsible for ongoing generic [price] inflation,” said Adam Fein, president of Pembroke Consulting, a drug channel consultancy.

Fein says FDA has a backlog of about 4,000 applications to clear and the agency’s regulatory hurdles are blocking Indian generic drugmakers from entering the market.

“Buying pharmaceuticals from the perspective of the patient or the hospital is not like buying a car or a dishwasher,” said Dr. Jeremy Greene, a physician and assistant professor of medicine at Johns Hopkins University. “You can’t just wait for them to go on sale.

“We don’t control the timing of when we are sick and need to buy essential medicines,” said Greene. “Price spikes are neither rare nor trivial.”

Removing Generics from Market

In 2006, FDA implemented an initiative to get some cheap generic drugs off the market. More than 1,000 medications predate FDA’s approval process under the 1938 Food, Drug & Cosmetics Act and were grandfathered in but never officially approved. Although many of these remedies have been used safely for decades, FDA wants them off the market and replaced with expensive “approved” versions from any drugmaker willing to conduct clinical studies on them.

One example is Colchicine, an inexpensive drug used to treat gout and other inflammatory conditions. A pharmaceutical company agreed to conduct clinical studies on the 3,000-year-old remedy and sought FDA approval for it as a new drug. Once approved by FDA, the generic, grandfathered versions of the drug were pulled from the pharmacy shelves. As a result, the therapy’s price rose from pennies per pill to as much as $7 per tablet.

Another example is neostigmine, which is routinely used at the end of surgery to reverse the effects of anesthesia. It had been used for decades and predated FDA’s approval process. After a drugmaker began clinically testing the product, the generic versions of the old drug became scarce, as other manufactures knew the older, generic versions would be forced off the market. Once Bloxiverz, the newer version of neostigmine, was approved in June 2013, the exclusive manufacturer was able to raise the price. Between October 2013 and April 2014, the price rose by 522 percent, according to a congressional investigation.

One of the most egregious examples of price hikes for testing an old drug is Delalutin, a progesterone injection originally approved in 1956 to prevent miscarriages. Although Delalutin was dropped by its manufacturer in 2000, it was still available at compounding pharmacies for about $10 per injection. In return for performing some small clinical trials for its use in preventing preterm births, a drugmaker was granted an exclusive seven-year permit to market it as an “orphan drug” under the brand name Makena. Armed with an exclusive right to sell the drug, the price shot up from just $10 per injection at compounding pharmacies to $1,500 for the name-brand injections. Makena’s price was later reduced to $690.

No Problems, Still a Problem

Shortly after FDA’s 2006 initiative began, Deborah Autor, director of the Office of Compliance at the FDA Center for Drug Evaluation and Research, told FDA Consumer magazine, “Even if the drug has been marketed for many years with no known safety problems, companies will still need to comply. The absence of evidence of a safety problem does not mean a product is truly safe.”

Joseph Biskupiak, a research professor in the Department of Pharmacotherapy at the University of Utah, says it is hard to fault companies for trying to recoup the cost of expensive clinical trials.

“FDA cannot approve a drug without the clinical trials, so it is up to Congress to decide if it is really necessary to conduct a clinical trial on a drug that has been used for many years just to get it approved,” said Biskupiak.

“[Congress could legislate] an alternative pathway to approval for these grandfathered drugs that does not require a costly clinical trial,” Biskupiak said.

Some of the generic drug price spikes are unavoidable as firms update facilities or decide to exit the market, and some generic drug inflation is due to slow action by FDA. In other cases, FDA is needlessly forcing consumers to pay higher prices to prove a drug that’s been used safely for decades is actually safe.

Devon M. Herrick, Ph.D. (devon.herrick@ncpa.org) is a health economist and senior fellow at the National Center for Policy Analysis.

Author
Devon Herrick, Ph.D., worked for the National Center for Policy Analysis (NCPA) until it ceased operations in July 2017. He is a policy advisor to The Heartland Institute.
media@heartland.org @DevonHerrick

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