January 17, 2019
FDA and Drug Prices: Facilitating Access to Generic Drugs
A variety of proposals to address high drug prices have
been introduced in legislation and by the Trump
Administration in its blueprint to lower drug prices.
According to a Food and Drug Administration (FDA)
analysis, the price of a drug is associated with the number
of generic manufacturers on the market. As such, absent
new legislation, FDA—the primary federal regulator of
prescription drugs—can help reduce drug prices indirectly
by facilitating competition. This In Focus describes selected
FDA actions intended to lower drug prices through generic
competition, and considerations for the 116th Congress.
Proposals that would not involve FDA (e.g., price
negotiation under Medicare) are not discussed.
Prescription Drug Regulation
Before a new drug may be marketed in the United States, it
must be approved by FDA. To obtain approval, the sponsor
(generally the manufacturer) must submit to FDA a new
drug application (NDA) containing, among other things,
data from clinical trials. The Federal Food, Drug, and
Cosmetic Act (FFDCA) specifies the required contents of
an NDA, provides for the conditions under which FDA may
deny approval of an NDA, and prohibits certain acts with
respect to drugs (e.g., adulteration, misbranding, and sale of
counterfeit drugs). The law does not expressly require an
NDA to include price information, does not authorize FDA
to deny approval of an NDA because of price, and does not
prohibit the marketing of a drug whose price may be
considered too high.
Figure 1. FDA’s Statutory Authority to Approve
Prescription Drugs
Source: FFDCA Section 505(b) and 505(d).
The FFDCA does not explicitly prohibit FDA from
requiring drug manufacturers to submit pricing information,
although the agency has consistently indicated that it does
not have the authority to control or investigate drug prices.
FDA can, however, affect drug prices indirectly by
facilitating competition, specifically by (1) increasing
access to generic drugs and (2) decreasing so-called
“gaming” of existing statutory and regulatory requirements.
Increasing Access to Generic Drugs
Unlike brand-name drugs, generic drugs are approved under
an expedited pathway created by the Drug Price
Competition and Patent Term Restoration Act of 1984
(Hatch-Waxman Act; P.L. 98-417). A generic drug
manufacturer may submit to FDA an abbreviated NDA
(ANDA), rather than a full NDA, demonstrating that the
generic is the same as the brand drug (i.e., the reference
listed drug or RLD). By relying on FDA’s previous
determination that the RLD is safe and effective, the
generic drug company can avoid replicating costly clinical
trials already conducted by the brand company. The HatchWaxman Act has been considered successful in increasing
generic drug competition. Generics now account for 90% of
U.S. prescriptions dispensed but 23% of prescription drug
spending, while brand-name drugs make up 10% of
prescriptions dispensed but 77% of prescription drug
spending. According to the Association for Accessible
Medicine’s (AAM) 2018 Generic Drug Access & Savings
Report, in 2017, savings from generic drugs in the United
States totaled $265.1 billion, including $82.7 billion in
savings to Medicare and $40.6 billion to Medicaid.
Although FDA does not have explicit statutory authority to
regulate drug pricing, the agency can prioritize the review
of certain ANDAs, thus allowing a lower-priced alternative
onto the market more quickly. In June 2017, as part of its
Drug Competition Action Plan, FDA posted on its website a
list of off-patent, off-exclusivity drugs for which there are
no approved generics and announced its intent to expedite
the review of ANDAs for drugs on this list until there are
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
agency has issued various guidance documents and held
public workshops to facilitate the development of generic
drugs, including complex generics.
Decreasing Gaming
Despite the successes of the Hatch-Waxman Act, certain
practices have emerged that may be disrupting the law’s
intended balance between innovation and competition. FDA
has taken action to address two such practices used by
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
strategies (REMS), and (2) filing of citizen petitions.
REMS
FDA may require a REMS, under specified conditions, for
certain drugs that it otherwise may have kept off the market
due to safety risks (FFDCA §505-1). As part of a REMS, a
drug manufacturer may be required to impose restriction on
a drug’s distribution via one or more elements to ensure
safe use (ETASU). An ETASU is a restriction on
distribution or use that is intended to (1) allow access to
those who could benefit from a drug while minimizing the
risk of adverse events, and (2) block access to those for
whom the risks would outweigh the potential benefits. An
ETASU could require, for example, that pharmacies that
dispense the drug be specially certified or that the patient
using the drug be subject to monitoring. A brand drug and
its generic must use a single, shared system of ETASU, but
FDA may waive this requirement for the generic drug if (1)
the burden of creating a single, shared system outweighs the
benefit, or (2) an aspect of the ETASU for the RLD is
claimed by an unexpired patent or is a method entitled to
protection, and the generic applicant certifies that it sought
but was unable to obtain a license for use of the ETASU.
The FFDCA prohibits the brand company from using
ETASU to block or delay approval of an application.
However, FDA, the Federal Trade Commission (FTC), and
other stakeholders have reported that some brand
companies are using REMS to prevent or delay generic
drugs from entering the market. First, to obtain approval of
an ANDA, the generic manufacturer must demonstrate to
FDA that, among other things, the generic is bioequivalent
(absorbed at the same rate and to the same extent) to the
brand drug; this testing requires a sufficient quantity of the
brand-name drug. Second, even when a generic company
has acquired the necessary samples, conducted the required
testing, and obtained FDA approval, challenges in
negotiating a single, shared system of ETASU also can
delay the generic drug from entering the market. Brand
companies have justified their refusal to sell samples to
competitors by citing safety concerns (e.g., that the generic
company may not ensure safe use of the drug) and liability
concerns (e.g., the brand company could be held liable for
any injuries caused by the generic product, which could
result in regulatory action against the RLD).
FDA has attempted to address misuse of REMS through its
existing authorities. In December 2014, FDA issued draft
guidance outlining the steps that an ANDA sponsor should
take to obtain a letter from FDA to the brand company,
indicating that the ANDA sponsor’s proposed
bioequivalence testing protocol is comparably as safe as the
applicable ETASU, and that it would not be a violation of
the REMS to provide the product samples for such testing.
However, FDA cannot compel a company to sell samples to
another sponsor, and the guidance has been described by
AAM as ineffective. FDA has published on its website a list
of drugs for which it has received sample access inquiries
related to limited distribution of the brand drug; the list
includes the name of the brand company and number of
inquiries received. FDA has issued one draft guidance to
facilitate the submission and review process for shared
system REMS and another describing how and when FDA
will consider waiving a single, shared system requirement,
and how generic drug applicants can request a waiver.
Citizen Petitions
The citizen petition process allows interested stakeholders,
including drug companies, to bring concerns to FDA’s
attention. A petition can request that FDA take certain
action (e.g., require warnings on a drug’s labeling) or that
FDA delay an administrative action (e.g., approval of an
ANDA). Due to concerns about misuse of citizen petitions,
FFDCA Section 505(q) was enacted. It prohibits FDA from
delaying approval of a pending application based on a
citizen petition or stay of action (SOA) request unless the
agency determines, upon reviewing the petition or SOA,
that a delay is necessary to protect the public health. FDA
may deny at any time a petition that was “submitted with
the primary purpose of delaying the approval of an
application” and that “does not on its face raise valid
scientific or regulatory issues,” but has never done so.
Although citizen petitions have rarely delayed specific
generic drug approvals, FDA has expressed concern that
petitions are being submitted with intent to delay generic
competition and that because of the 150-day deadline by
which FDA needs to take final action on a petition, they
take resources away from other work. In October 2018,
FDA issued a revised version of its draft guidance “Citizen
Petitions and Petitions for Stay of Action Subject to Section
505(q) of the [FFDCA].” Unlike the earlier draft, it includes
a list of factors FDA intends to consider in determining
whether a petition has been submitted to delay application
approval (e.g., submission of serial petitions raising issues
that could have been addressed in the original petition). Per
the draft guidance, if FDA determines that a petition has
been submitted with the primary purpose of delaying an
application, it will refer the matter to FTC and will
highlight those determinations in its annual reports to
Congress.
Considerations for the 116th Congress
FDA is using its existing authorities to facilitate
competition and indirectly tackle high drug prices.
However, Congress may consider expanding FDA’s
authority to affect drug prices. For example, Congress could
revisit legislation from the 115th intended to keep brand
companies from using REMS to prevent or delay generics
from entering the market. The Fair Access for Safe and
Timely (FAST) Generics Act of 2017 (H.R. 2051) and the
Creating and Restoring Equal Access to Equivalent
Samples (CREATES) Act of 2017 (S. 974, H.R. 2212) each
would have established a mechanism for a generic company
to obtain samples of the brand drug for testing purposes,
although in different ways. These bills are further described
in CRS Report R44810, FDA Risk Evaluation and
Mitigation Strategies (REMS): Description and Effect on
Generic Drug Development). Regarding 505(q) petitions,
Congress may consider codifying aspects of FDA’s draft
guidance or establishing monetary penalties for entities that
file serial petitions with the primary purpose of delaying
competition. Congress also may consider, among other
things, explicitly authorizing FDA to require drug price
https://crsreports.congress.gov
FDA and Drug Prices: Facilitating Access to Generic Drugs
-related information as part of an NDA, for purposes of
approval or otherwise, or to prohibit high drug prices.
Agata Dabrowska, Analyst in Health Policy
IF11075
Disclaimer
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