What To Do About the High Cost of Pharmaceuticals? Part 3 | Institute for Health Policy Leadership

By IHPL - October 5, 2018

Part 3: Decreasing the Barriers to Generic Entry

In this final installment of the prescription drugs blog series, I will be discussing another government strategy to tackling the high prices of prescription drugs: promoting market competition by reducing the barriers of entry for generic drugs.

The Food and Drug Administration (FDA) defines a generic drug as “a medication created to be the same as an already marketed brand-name drug in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use.” Given this definition, the only differences between a generic drug and the brand medication are the look of the medication and its price.¹

Blue Cross Blue Shield of Michigan (BCBSM) put together a chart for consumers in which they compared a 1-month supply of 25 brand drugs with their generic versions.² Here were the results for the three largest and smallest cost savings:

Drug Function	Brand Name	Generic Name	Cost Savings
To treat gastroesophageal reflux disease (GERD)	Nexium®	Esomeprazole Magnesium	39%
To treat attention-deficit/hyperactivity disorder (ADHD)	Focalin XR®	Dexmethylphenidate HCl	43%
To treat schizophrenia, bipolar disorder, Tourette syndrome, and depression	Abilify® 5 mg	Aripiprazole	49%
To treat depression and generalized anxiety disorder	Lexapro®	Escitalopram Oxalate	99%
To treat and prevent seizures and migraines	Topamax®	Topiramate	99%
To treat depression, obsessive-compulsive disorder, bulimia nervosa, and panic disorder	Prozac®	Fluoxetine HCl	100%

In the case of Prozac®, the cost of a 30 day supply was $1,713.32 whereas the cost of the generic was $21.60 according to 2015 data from BCBSM. What makes a generic so much cheaper? Generic drug makers do not have to spend nearly as much on creating the drug and undergoing clinical trials or marketing and advertising. Marketing and advertising often cost more than the research and development process for a drug.³ Consider that in 2013, Johnson and Johnson spent more than double on marketing and advertising than on researching the drug which cost $8.2 billion.⁴ In regards to researching the drug, generic companies are required to wait until the patent on the drug expires, after which they are allowed to acquire information regarding the active ingredient.

Some members of Congress aim to bring down pharmaceutical drug costs by increasing market competition for drugs by decreasing the barriers that generic companies may face. One such attempt is the Making Pharmaceutical Markets More Competitive Act (S. 1115) which would require the FDA to expedite the review process for drugs that are in shortage and for which there are up to three approved drugs.⁵ This bill is specifically targeting the issue in which brand drugs hike their prices as soon as they go off patent, mostly because there are few or no other competitors and because pharmaceutical companies are allowed set their prices as they wish.⁶ These price hikes are often done at the expense of public health. By ensuring that there is adequate (as defined by the Congressperson) competition, the bill should increase the availability of a drug at a fair price even if the branded drug goes off-patent.

Another bill, known as the Price Relief, Innovation, and Competition for Essential Drugs (PRICED) Act (H.R. 6577), proposes changing the market exclusivity for biologics (non-chemically synthesized molecules) from 12 years to 7 years.⁷ Once a new biologic successfully undergoes the FDA approval process, the manufacturers receive a 12-year market exclusivity period (not to be confused with a patent) under which a generic company cannot file for FDA approval. While this bill hopes to make it easier for generics to enter the market sooner, it does not address the fact that there will still be patents in place. These patents can still disincentivize generic companies from filing for the approval process.⁸

It seems that with the complex structure of patents and exclusivities, unless the bills are comprehensive enough to address all of the potential barriers, they will be rather ineffective or only partially effective. Moreover, during my research, I came across two articles that planted a small seed of doubt in my mind regarding the effectiveness of generics. The first was a 2013 Fortune magazine article written by Katherine Eban, a Rhodes Scholar and investigative reporter, who asked the question of whether generics are truly bioequivalent. She brought up an instance in 2013 when the FDA withdrew approval for Teva’s generic version of the antidepressant Wellbutrin. Complaints about its lack of effectiveness led to an independent trial in which it was determined that the concentration of the drug in the bloodstream was much less than the minimum 80 percent.⁹ The generic version is now sold by multiple other companies including Alembic Pharma.¹⁰ In his The Atlantic article, Dr. Jeremy Greene brings up another point of consideration. He says that the coating of a drug is very specific as it includes its own set of inactive ingredients that may contribute to its efficacy. This branding, however, is something that pharmaceutical companies have a right over long past the market exclusivity.¹¹ With the FDA spending more on “advancing regulatory science,” we may start to question whether our current definitions of bioequivalence are sufficient.¹²

In this 3-part series, I introduced three strategies that our government was looking into in order to combat the high pharmaceutical prices and offered positive and negative aspects for each of them. In my opinion, this battle will be ongoing because of the lobbying power of pharmaceutical companies. Once upon a time, a person’s story was powerful enough to change the hearts and minds of our lawmakers. I’m hoping that Shane Patrick Boyle’s story in which he could not afford his insulin and passed away after trying to ration it or Hattie Saltzman’s story¹³ in which she is taking her father’s insulin because she cannot afford to purchase her own will light the torch to prioritizing “human need over pharma greed.”¹⁴

Author bio:

Priya Vedula is a health policy analyst at the Institute for Health Policy and Leadership. Her work involves examining health policies and regulations with a focus on oral health, mental/behavioral health, and hunger. She received her Master of Public Health degree from Columbia University.

Part 3: Decreasing the Barriers to Generic Entry

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