Generic Drugs, Cost-Effectiveness, and Confidence

Smarter prescribing and better medication management are linchpins of current efforts to care for those with chronic medical conditions in a more consistent, coordinated, and, it is hoped, affordable manner.  A study reported in last month’s Health Affairs found that using medication to control patients’ blood sugar levels and lower their blood pressure and cholesterol is not just cost-effective, it can actually save money by reducing “downstream complications and the use of health services that outweigh the cost of the medications themselves.”  Notably, these cost savings can only be achieved if the medications in question are generics.  The authors conclude that “in a health care system strapped for resources, physicians will increasingly use generics, and patients will have to expect that most of their medications will be generic.”

As the authors also note, resistance to generics, on the part of both patients and their doctors, is longstanding and persistent.  Some of this can be chalked up to the intense and wide-ranging marketing campaigns that innovator companies mount on behalf of branded drugs.  Branded medications used to treat chronic conditions are especially heavily marketed, including through the use of free samples.  Numerous studies (here’s a recent one out of Vermont) show that physicians with sample closets in their offices are less likely than those without sample closets to prescribe generics where appropriate.

Interestingly, the Centers for Medicare and Medicaid Services announced earlier this year that Medicaid Part D prescription drug plans “may incur expenses related to distribution of and reporting on generic drug samples, provided to members within a physician’s office setting, under the plan’s administrative cost structure if doing so is consistent with a cost effective drug utilization management program.”  CMS explained that generic samples have the potential to reduce the government’s overall costs and to promote compliance with drug therapies by reducing enrollees’ current and future cost sharing expenses.  (George Van Antwerp argues here that CMS overstates the benefits of generic samples, but only because generic fill rates are rising so fast without them.)

Marketing is not the whole story behind lingering resistance to generics, though.  As the New York Times recently reported, most generic drugs are manufactured in “a shadowy network of facilities in China and India that are rarely visited by government inspectors, who sometimes cannot even find the plants.”  While plants in the United States are inspected at least once every two years, the Food and Drug Administration has historically lacked the resources to provide the same level of oversight to foreign facilities.  An “epoch-making” agreement between the FDA and generic drug manufacturers will, assuming it is approved by Congress, change this.  The manufacturers have agreed to pay $299 million in annual fees to, among other things, fund inspections of foreign plants on the same schedule that applies to domestic plants.  As the Times notes: “[T]he generic drug industry is no longer a motley collection of struggling mom-and-pop companies.  Years of consolidation have created giants like Israel-based Teva Pharmaceuticals that understand that their businesses depend on winning the confidence of patients and regulators alike, and they can afford to pay the fees needed to achieve that confidence.”

Podcast: Gibbons Institute Hosts Panel on Pay for Delay in Hatch-Waxman Patent Litigation

Seton Hall Law’s Gibbons Institute of Law, Science & Technology and the New Jersey Intellectual Property Law Association presented a panel discussion entitled, “Pay for Delay: Views from the FTC, Industry and Legal Economists on Reverse Payment Settlements in Hatch-Waxman Patent Litigation.”

The pay for delay debate essentially rests on two competing public interests: scientific innovation and access to medicines.  Reverse settlements, which are sometimes referred to as “pay for delay,” involve the practice of name-brand pharmaceutical companies paying would-be generic competitors to delay the entry into the market of a particular generic drug. The Federal Trade Commission and the Department of Justice decry the practice because they claim it results in higher prices for consumers who do not have access to cheaper generics. Many in the brand-name pharmaceutical industry defend the practice because, they argue, extending the patent exclusivity period of an innovator drug better allows innovator companies to improve their return on investment and thus underwrite further research and innovation.

Panelists included Michael Kades, Attorney Advisor, Federal Trade Commission; Charles A. Gallia, Counsel, Gibbons P.C.; Anastasia Winslow, Assistant General Counsel, Bristol-Myers Squibb; and David Opderbeck, Associate Professor of Law and Director, Gibbons Institute of Law, Science & Technology. You can listen to their discussion here.

Hatch-Waxman “Pay for Delay Audio

Biologics, How Long Exclusive? What Cost?

Expression of Fabp7 protein in mouse brains at embryonic day 16 (left) and postnatal day 0 (right). At both stages, Fabp7 is strongly expressed in the ventricular zone and radial glia, where neurogenesis is prominent. From, A Candidate Gene for a Biological Marker of Schizophrenia in Mice Gross L PLoS Biology Vol. 5, No. 11.

Biologics — products such as vaccines, gene therapy, tissues, and recombinant therapeutic proteins that are isolated from natural sources and may be produced by biotechnology methods and other technologies — are at the center of a national debate regarding access to cutting-edge therapies and protection of biotech’s ability to create products that may require millions of dollars to develop. As always, Mintz Levin, Health Law Washington Beat (link also in the “Resources” section of this blog) has offered great coverage of the issue– articles here and here.

For months now, the federal government has been considering legislation to balance the competing need for scientific and medical innovation with the costs to patients for biosimilars (generic versions of innovator pioneer biologics, also referred to as follow-on biologics).  Unlike its approval pathway for generic small-molecule, chemically synthesized drugs, the FDA currently has no process for the approval of biosimilars.  All regulatory proposals by both the Senate and the House have included an exclusivity period for pioneer biologics before a generic biologic may be introduced in the market, as well as patent protections for the pioneer biologic.

As part of its July 15, 2009 health reform bill, the Senate Health, Education, Labor, and Pensions (HELP) Committee adopted an amendment proposed by Senators Kay Hagan (D-NC), Michael Enzi (R-WY), and Orrin Hatch (R-UT) that provides for a 12-year exclusivity period for pioneer biologics.  Among the Senate’s other biosimilar proposals, all introduced in June 2009, Senator Sherrod Brown (D-OH)’s bill allows for seven years of exclusivity, Senator Charles Schumer (D-NY)’s bill provides for a 5 year exclusivity period, and the proposal by Senator Edward Kennedy (D-MA) calls for a nine-year exclusivity period.  In the House, Reps. Henry A. Waxman (D-CA)’s proposed bill limits the exclusion period to five years, while Anna Eshoo (D-CA)’s bill proposes an initial exclusivity period of 12 years, with a possible additional two-and-a-half years for new indications and pediatric populations.

In June 2009, the FTC released a report that determined that innovation and investment will be sustained even without the exclusivity recommended by even the least restrictive of the proposed bills.  The report states that the competition between pioneer and follow-on biologics will more closely resemble the competition between different brands of drugs — with the pioneer biologic retaining 70-90% of the market share — rather than the competition between small-molecule branded pharmaceuticals and their comparable generics — where entry of the generic drug on the market leads to loss of market share and drop in the price of the drug.  The FTC found that due to the complexities in the development and use of biologics and the absence of therapeutic equivalence between pioneer and follow–on biologics, biosimilars are unlikely to be direct substitutes for the pioneer biologics on which they were based.

Relying on the FTC’s conclusion that the introduction of follow-on biologics will lower prices and increase access, Read more

House Subcommittee Hearing Scheduled Today: The End of “Pay to Go Away” Deals Between Drugmakers?

Photo by thinkpanama via Flickr

A House Energy and Commerce subcommittee hearing was scheduled for today regarding the practice of brand-name pharmaceutical companies paying generic drugmakers to delay the launch of their drugs.  These agreements, sometimes known as “pay to go away” arrangements, allow the brand-name pharmaceutical companies to benefit by keeping the cheaper generic drugs off the market for a period of time,  and essentially holding a monopoly on the drug for longer.  The generic drug company also benefits, as they are paid to simply delay their drug’s entrance into the market.

The Wall Street Journal reported that the FTC has fought these payments for years, Democrats have discussed passing legislation to forbid such deals, and President Obama has promised to stop the arrangements in his budget.  Senator Herb Kohl (D-Wis.) introduced a bill in February to abolish these deals and Rep. Bobby Rush (D-Ill.) introduced a comparable bill in the House last week.

The WSJ states that generic drugs can cost as little as a quarter of the brand-name drug, which can ultimately save billions of dollars in drug costs.  Eliminating the deals that keep the generic drugs off the market would therefore create significant savings to the country’s health care system.  Scott Hemphill, associate Professor at Columbia Law School, told the WSJ that ten brand-name drugs with about $17 billion in annual sales are now protected by the agreements, including Pfizer’s Lipitor.  Pfizer said that this was not the case.

Since 2001, the FTC has filed six suits to stop these deals, with little success.  However, in February, FTC Commissioner Jon Leibowitz said that he believed Obama’s administration was going take action to stop the “pay to go away” deals.  According to Medical News Today:

Leibowitz said “The new administration does seem to recognize that this is a real problem.”  He added that “fixing it … would actually help pay for health care reform.” Leibowitz said FTC will take a two-pronged approach to stopping “pay-for-delay” settlements. First, the agency will challenge the most anti-competitive settlements in court, and secondly, it will support legislation against such deals. Leibowitz said he expects the Obama Department of Justice to be “much more supportive” of legal challenges to the settlements than the Bush administration. He added that it also is possible “the-pay-for delay settlement issue or problem will get resolved in health care reform, and … if that happens, then it will presumably get resolved more expeditiously.”