FDA and Drug Prices: Facilitating Access to Generic Drugs

FDA and Drug Prices: Facilitating Access to Generic Drugs

January 17, 2019
FDA and Drug Prices: Facilitating Access to Generic Drugs
A variety of proposals to address high drug prices have
Increasing Access to Generic Drugs
been introduced in legislation and by the Trump
Unlike brand-name drugs, generic drugs are approved under
Administration in its blueprint to lower drug prices.
an expedited pathway created by the Drug Price
According to a Food and Drug Administration (FDA)
Competition and Patent Term Restoration Act of 1984
analysis, the price of a drug is associated with the number
(Hatch-Waxman Act; P.L. 98-417). A generic drug
of generic manufacturers on the market. As such, absent
manufacturer may submit to FDA an abbreviated NDA
new legislation, FDA—the primary federal regulator of
(ANDA), rather than a full NDA, demonstrating that the
prescription drugs—can help reduce drug prices indirectly
generic is the same as the brand drug (i.e., the reference
by facilitating competition. This In Focus describes selected
listed drug or RLD). By relying on FDA’s previous
FDA actions intended to lower drug prices through generic
determination that the RLD is safe and effective, the
competition, and considerations for the 116th Congress.
generic drug company can avoid replicating costly clinical
Proposals that would not involve FDA (e.g., price
trials already conducted by the brand company. The Hatch-
negotiation under Medicare) are not discussed.
Waxman Act has been considered successful in increasing
generic drug competition. Generics now account for 90% of
Prescription Drug Regulation
U.S. prescriptions dispensed but 23% of prescription drug
Before a new drug may be marketed in the United States, it
spending, while brand-name drugs make up 10% of
must be approved by FDA. To obtain approval, the sponsor
prescriptions dispensed but 77% of prescription drug
(generally the manufacturer) must submit to FDA a new
spending. According to the Association for Accessible
drug application (NDA) containing, among other things,
Medicine’s (AAM) 2018 Generic Drug Access & Savings
data from clinical trials. The Federal Food, Drug, and
Report, in 2017, savings from generic drugs in the United
Cosmetic Act (FFDCA) specifies the required contents of
States totaled $265.1 billion, including $82.7 billion in
an NDA, provides for the conditions under which FDA may
savings to Medicare and $40.6 billion to Medicaid.
deny approval of an NDA, and prohibits certain acts with
respect to drugs (e.g., adulteration, misbranding, and sale of
Although FDA does not have explicit statutory authority to
counterfeit drugs). The law does not expressly require an
regulate drug pricing, the agency can prioritize the review
NDA to include price information, does not authorize FDA
of certain ANDAs, thus allowing a lower-priced alternative
to deny approval of an NDA because of price, and does not
onto the market more quickly. In June 2017, as part of its
prohibit the marketing of a drug whose price may be
Drug Competition Action Plan, FDA posted on its website a
considered too high.
list of off-patent, off-exclusivity drugs for which there are
no approved generics and announced its intent to expedite
Figure 1. FDA’s Statutory Authority to Approve
the review of ANDAs for drugs on this list until there are
Prescription Drugs
three approved ANDAs for each RLD. These actions were
codified by Title VIII of the FDA Reauthorization Act of
2017 (P.L. 115-52). In its manual of policies and
procedures, FDA specifies which ANDAs it will prioritize
for review (e.g., ANDAs for “sole source” drugs or for
drugs in shortage); the cost of the brand drug is not listed as
a consideration for prioritization. To promote competition,
FDA is evaluating the feasibility of drug importation from
other countries in the case of price increases for sole source
off-patent, off-exclusivity drugs. FDA also can increase
access to generic drugs by helping manufacturers comply
with statutory and regulatory approval requirements. The
Source: FFDCA Section 505(b) and 505(d).
agency has issued various guidance documents and held

public workshops to facilitate the development of generic
The FFDCA does not explicitly prohibit FDA from
drugs, including complex generics.
requiring drug manufacturers to submit pricing information,
although the agency has consistently indicated that it does
Decreasing Gaming
not have the authority to control or investigate drug prices.
Despite the successes of the Hatch-Waxman Act, certain
FDA can, however, affect drug prices indirectly by
practices have emerged that may be disrupting the law’s
facilitating competition, specifically by (1) increasing
intended balance between innovation and competition. FDA
access to generic drugs and (2) decreasing so-called
has taken action to address two such practices used by
“gaming” of existing statutory and regulatory requirements.
brand companies to delay approval of generic competitors:
https://crsreports.congress.gov

FDA and Drug Prices: Facilitating Access to Generic Drugs
(1) misuse of required risk evaluation and mitigation
system REMS and another describing how and when FDA
strategies (REMS), and (2) filing of citizen petitions.
will consider waiving a single, shared system requirement,
and how generic drug applicants can request a waiver.
REMS
FDA may require a REMS, under specified conditions, for
Citizen Petitions
certain drugs that it otherwise may have kept off the market
The citizen petition process allows interested stakeholders,
due to safety risks (FFDCA §505-1). As part of a REMS, a
including drug companies, to bring concerns to FDA’s
drug manufacturer may be required to impose restriction on
attention. A petition can request that FDA take certain
a drug’s distribution via one or more elements to ensure
action (e.g., require warnings on a drug’s labeling) or that
safe use (ETASU). An ETASU is a restriction on
FDA delay an administrative action (e.g., approval of an
distribution or use that is intended to (1) allow access to
ANDA). Due to concerns about misuse of citizen petitions,
those who could benefit from a drug while minimizing the
FFDCA Section 505(q) was enacted. It prohibits FDA from
risk of adverse events, and (2) block access to those for
delaying approval of a pending application based on a
whom the risks would outweigh the potential benefits. An
citizen petition or stay of action (SOA) request unless the
ETASU could require, for example, that pharmacies that
agency determines, upon reviewing the petition or SOA,
dispense the drug be specially certified or that the patient
that a delay is necessary to protect the public health. FDA
using the drug be subject to monitoring. A brand drug and
may deny at any time a petition that was “submitted with
its generic must use a single, shared system of ETASU, but
the primary purpose of delaying the approval of an
FDA may waive this requirement for the generic drug if (1)
application” and that “does not on its face raise valid
the burden of creating a single, shared system outweighs the
scientific or regulatory issues,” but has never done so.
benefit, or (2) an aspect of the ETASU for the RLD is
claimed by an unexpired patent or is a method entitled to
Although citizen petitions have rarely delayed specific
protection, and the generic applicant certifies that it sought
generic drug approvals, FDA has expressed concern that
but was unable to obtain a license for use of the ETASU.
petitions are being submitted with intent to delay generic
competition and that because of the 150-day deadline by
The FFDCA prohibits the brand company from using
which FDA needs to take final action on a petition, they
ETASU to block or delay approval of an application.
take resources away from other work. In October 2018,
However, FDA, the Federal Trade Commission (FTC), and
FDA issued a revised version of its draft guidance “Citizen
other stakeholders have reported that some brand
Petitions and Petitions for Stay of Action Subject to Section
companies are using REMS to prevent or delay generic
505(q) of the [FFDCA].” Unlike the earlier draft, it includes
drugs from entering the market. First, to obtain approval of
a list of factors FDA intends to consider in determining
an ANDA, the generic manufacturer must demonstrate to
whether a petition has been submitted to delay application
FDA that, among other things, the generic is bioequivalent
approval (e.g., submission of serial petitions raising issues
(absorbed at the same rate and to the same extent) to the
that could have been addressed in the original petition). Per
brand drug; this testing requires a sufficient quantity of the
the draft guidance, if FDA determines that a petition has
brand-name drug. Second, even when a generic company
been submitted with the primary purpose of delaying an
has acquired the necessary samples, conducted the required
application, it will refer the matter to FTC and will
testing, and obtained FDA approval, challenges in
highlight those determinations in its annual reports to
negotiating a single, shared system of ETASU also can
Congress.
delay the generic drug from entering the market. Brand
companies have justified their refusal to sell samples to
Considerations for the 116th Congress
competitors by citing safety concerns (e.g., that the generic
FDA is using its existing authorities to facilitate
company may not ensure safe use of the drug) and liability
competition and indirectly tackle high drug prices.
concerns (e.g., the brand company could be held liable for
However, Congress may consider expanding FDA’s
any injuries caused by the generic product, which could
authority to affect drug prices. For example, Congress could
result in regulatory action against the RLD).
revisit legislation from the 115th intended to keep brand
companies from using REMS to prevent or delay generics
FDA has attempted to address misuse of REMS through its
from entering the market. The Fair Access for Safe and
existing authorities. In December 2014, FDA issued draft
Timely (FAST) Generics Act of 2017 (H.R. 2051) and the
guidance outlining the steps that an ANDA sponsor should
Creating and Restoring Equal Access to Equivalent
take to obtain a letter from FDA to the brand company,
Samples (CREATES) Act of 2017 (S. 974, H.R. 2212) each
indicating that the ANDA sponsor’s proposed
would have established a mechanism for a generic company
bioequivalence testing protocol is comparably as safe as the
to obtain samples of the brand drug for testing purposes,
applicable ETASU, and that it would not be a violation of
although in different ways. These bills are further described
the REMS to provide the product samples for such testing.
in CRS Report R44810, FDA Risk Evaluation and
However, FDA cannot compel a company to sell samples to
Mitigation Strategies (REMS): Description and Effect on
another sponsor, and the guidance has been described by
Generic Drug Development). Regarding 505(q) petitions,
AAM as ineffective. FDA has published on its website a list
Congress may consider codifying aspects of FDA’s draft
of drugs for which it has received sample access inquiries
guidance or establishing monetary penalties for entities that
related to limited distribution of the brand drug; the list
file serial petitions with the primary purpose of delaying
includes the name of the brand company and number of
competition. Congress also may consider, among other
inquiries received. FDA has issued one draft guidance to
things, explicitly authorizing FDA to require drug price
facilitate the submission and review process for shared
https://crsreports.congress.gov

FDA and Drug Prices: Facilitating Access to Generic Drugs
-related information as part of an NDA, for purposes of
Agata Dabrowska, Analyst in Health Policy
approval or otherwise, or to prohibit high drug prices.
IF11075

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF11075 · VERSION 2 · NEW