A signature promise of the Trump administration has been to lower drug prices. One of the ways they have sought to do this is through the acceleration of generic drug approvals. They have succeeded in setting records for the number of generic drug approvals for each of the three years since 2016. According to the health data firm, IQVIA, the FDA has approved 2492 generic versions of 617 brand name pharmaceuticals. The Wall Street Journal reported that 40% of 2018’s 689 generic drug approvals haven’t been launched and through June of 2019 only 30% , or 134 of the 442 generic drug approvals, have gone on sale. Where are those generics and why aren’t we feeling this effort in our wallets?
The most common and longest used method of fighting generic drugs is for brand name drug makers to use the legal system to aggressively defend their product patents. Brand name manufacturers file additional patents around a particular ingredient or secondary patents tied to a drug’s formulation or delivery method. They then sue generic-drug companies for violating those patents.
The vast consolidation of the health care industry has reduced the number of companies willing to purchase and distribute generics. There are three large buying groups covering 90% of the market according to a Drug Channels Institute report. Pharmacy benefit managers have made it known that they don’t have room on their formularies for another generic partly because they give preferential treatment to the brand drug with lower copays, hurting the generic’s market share.
Pay for Delay
Sometimes makers of generics obtain approvals and then make a business decision to sit on those approvals. Brand name drug makers will pay them to keep their products off the market. The Federal Trade Commission estimates that these types of deals cost consumers and taxpayers $3.5 billion a year. The first generic approved has 180 days to take on the branded drug before any other generics can be approved. Stopping that generic from coming to market for 180 days can be very lucrative for the branded manufacturer.
Generic alternatives to branded drugs often aren’t priced low enough to make a substantial difference. It takes five generics on the market to drive prices down to 33% of the original brand name price, according to an FDA analysis. Medicare prescription drug plans cover 22% of generic drugs in their first year on the market, while private health plans cover 46% of generic drugs in their first year. Insurer’s slow uptake of generic drugs may reflect how the pharmaceutical supply chain’s rebate system creates incentives for payers to cover costlier brand name drugs instead of generic drugs.
The high cost of brand name drugs may not show up in your hospital bill as the higher costs get passed on to insurers, but you will see them in higher premiums. Taxpayers also feel the pinch of a lack of generic drugs through the need to cover the cost of drugs for Medicare and Medicaid patients. “It’s a real problem because we’re not getting all the expected competition,” says FDA Commissioner Scott Gottleib.
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