Generic Drug Industry Touts Savings Amid Criticism of Price Hikes

Bloomberg BNA's Pharmaceutical Law & Industry Report helps you stay informed of regulatory and litigation developments affecting the pharmaceutical and biotech industries....

By Bronwyn Mixter

Oct. 19 — The generic drug industry is touting its role in saving money for the U.S. health-care system even as some individual companies have been harshly criticized for price hikes.

The Generic Pharmaceutical Association (GPhA) said in a report released Oct. 19 that generic drug savings reached $227 billion in 2015. The group also said generics make up 89 percent of prescriptions dispensed, but only 27 percent of total medicine spending. Drugmakers are under heavy scrutiny by lawmakers, consumers, medical professionals and presidential candidates for their pricing practices. Most recently, generic drugmaker Mylan Inc. came under attack for increasing the cost of its EpiPen allergy injection by 400 percent in nine years.

Also, the American Hospital Association Oct. 11 issued a report on drug price increases and said prices are increasing for both branded and generic drugs.

Murray Aitken, executive director of the QuintilesIMS Institute, which compiled the report on behalf of the GPhA, said during a press briefing that the report doesn’t look at generic drug price increases. While Congress and the media have paid a lot of attention to individual price increases, “it is equally important to keep in mind the macroeconomic impact” of generic drugs, he said.

The GPhA supports policies that foster pharmaceutical competition, Chip Davis, the organization’s president and chief executive officer, said during the briefing. “Increased competition from generic products keeps costs down,” he said.

Specifically, Davis said the GPhA supports the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act ( S. 3056).

The CREATES Act would stop branded drug companies from using risk evaluation and mitigation strategies (REMS) to block or deny access to samples of branded drug products that generic companies need to conduct bioequivalence testing. The Food and Drug Administration can require a REMS to ensure the benefits of a drug outweigh its risks.

Drug Price Controls

However, Davis said the GPhA doesn’t support the Fair Accountability and Innovative Research (FAIR) Drug Pricing Act ( S. 3335, H.R. 6043), which would require drug manufacturers to notify the Department of Health and Human Services and to submit a report 30 days before increasing the price of certain drug products by more than 10 percent. The pharmaceutical industry has called the legislation an attempt to build a case for price controls.

Bloomberg Intelligence analyst Brian Rye told Bloomberg BNA “the report underscores why generic drugmakers don’t support government intervention to drive brand-name drug prices lower.”

“High brand-name prices give them a better opportunity to demonstrate their value proposition,” Rye said. “Forcibly lowered brand-name prices reduce the case for generic alternatives.”

Biosimilar Savings

The report also said biosimilar drugs will reduce costs and give patients more choices.

So far, the FDA has approved four biosimilars under a 2010 law that created a pathway for such approvals. According to the FDA, a biosimilar product is a biological product that is approved based on a showing that it is highly similar to an already approved biological product, known as a reference product.

According to QuintilesIMS, the global brand biologic medicines market is projected to exceed $390 billion by 2020, up from $46 billion in 2002. By 2020 biologics will account for up to 28 percent by value of the global market for pharmaceuticals. The report said “biosimilar competition is expected to decrease spending” on biologics and “biosimilars savings projections range from $44-$250 billion over 10 years.”

A spokesman for the Biotechnology Innovation Organization (BIO) told Bloomberg BNA Oct. 19 that BIO “has long recognized that a well-functioning market for generics and biosimilars, after an appropriate period of exclusivity for innovator products, is a vital component of our health-care delivery system.”

“However, any discussion regarding the cost savings and other benefits offered by generic and biosimilar products would be incomplete without acknowledging that such products are only possible thanks to the tremendous risk and expense born by innovator companies,” BIO’s spokesman said. “Biopharmaceutical research and development is a complex endeavor, with high capital costs, long development times, and a high failure rate—fewer than one in 10 potential medicines that enter clinical trials ultimately become an FDA approved treatment.”

The spokesman said that “all of this critically important trial and error must be funded by the handful of successful new treatments during a limited period of exclusivity prior to generic or biosimilar competition, in order to make the innovative biopharmaceutical research ecosystem economically sustainable.”

Support for Generic Industry

Michael Carome, director of Public Citizen’s Health Research Group, told Bloomberg BNA that Public Citizen “strongly supports the generic drug industry” and “generic competition is a good thing.” He said “the sooner they get on the market the better.”

The Pharmaceutical Care Management Association (PCMA), a group that represents pharmacy benefit managers (PBMs), also expressed support for the generic industry. Charles Cote, vice president of strategic communications at PCMA, told Bloomberg BNA “this study confirms that lower cost generics continue to save employers, unions and government payers billions of dollars.”

“PBMs are experts at delivering these savings through lower cost preferred pharmacy plans, generic incentive programs and mail-service pharmacies,” Cotes said.

Leigh Purvis, director of health services research, AARP Public Policy Institute, told Bloomberg BNA that “AARP has long-supported efforts to increase the use of less expensive but equally effective generic prescription drugs.”

“Generic drugs have created billions of dollars in savings for consumers and taxpayer-funded programs and will take on added importance as an increasing number of brand name and biological drugs enter the market with unusually high prices,” Purvis said.

User Fee Meetings

The report comes as the FDA will hold public meetings Oct. 20-21 to examine changes to the user fee programs that help fund the agency’s reviews of generic and biosimilar drugs. The FDA collects user fees from drugmakers to review applications for approvals of new products.

The size of those fees and what the drug review process itself will entail are negotiated every five years between the agency and the industry. The terms they reach must be approved by Congress before current fee programs expire in September 2017.

The FDA will hear from public health advocates, health-care professionals and industry groups on Oct. 20 about the agreement to renew the user fee program for biosimilars. The agreement requires the FDA by 2022 to approve or reject 90 percent of biosimilar applications within 10 months of filing. The user fee program for generic drugs will be assessed Oct. 21 at a public meeting. The FDA and industry agreement aims to simplify the review process and require the agency to approve or reject 90 percent of certain priority applications within eight months and others within 10 months.

To contact the reporter on this story: Bronwyn Mixter in Washington at bmixter@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.