The Color of Money – Green, Always Green

We have read a lot about the significant rising cost of some generic drug products, some shortage products, and some old products without competition, even though any period of patent or exclusivity has expired.  We all know of the Daraprim example and we hear that at least one company plans to compound the drug and offer it for $1 a tablet instead of the $700 being charged.  The product will not be an approved drug product and (supposedly) will be compounded in accord with the existing regulations and policy.  However, will it be a bioequivalent version of the brand name product?  Will the compounder be preparing the drug on a per-patient prescription basis? Will FDA decide to exercise enforcement discretion if the compounder makes a duplicate of an approved drug product, which would be in direct conflict with their Compliance Policy Guide on marketing of unapproved prescription drug products?  These are some of the questions that must be answered by patients, practitioners, and regulators before the picture is clear.

We must remember that FDA is not supposed to concern itself with pricing or economics in making approval or enforcement decisions.  FDA is supposed to make its decisions based on public health and safety and efficacy considerations.

The entire issue of pricing appears to be focused on a handful of drug products.  We must recognize we live in a free market economy, but there must also be an element of responsibility exercised, rather than only applying the “whatever the market will bear” philosophy.  We certainly don’t want to see the system keep patients from getting the drugs they desperately need and we don’t want to break the bank of private pay patients, insurers, and local, state, and federal governments.  So there needs to be a balance.  How do we achieve that balance?  The Hatch-Waxman Act of 1984 seemed to have done the trick, until chronic under-funding of the generic program coupled with increased regulatory requirements caused the current backlog that the Office of Generic Drugs is diligently working through.

Now we have the Generic Drug User Fee Act (GDUFA) that is addressing the years of neglect in public funding.  Feeling the full positive impact of GDUFA will take some time, but meantime, the Federal Government needs to also step up to the plate and increase the Federal appropriations to the program.  The government is probably the biggest “insurer” relative to healthcare and drug coverage when you consider Medicare, Medicaid, the armed and uniformed services in active duty and their dependents, the VA system and programs like the Indian Health Service and NIH.  We know that, based on credible reports, generic drugs have saved consumers over $1.5 trillion over the last decade.  Given that the government benefits from a huge share of that savings, one would think that the generic drug program is one program in which the Federal government should invest and increase the appropriate funds.  Pumping $300 million dollars into a program that saves you hundreds of billions of dollars a year seems like a good investment in long-term savings.  Unfortunately, Congress does not always think that way.

Continuing to rely on industry-funded increases through the GDUFA program is, in my opinion, misguided, as the drug manufacturers will continue to raise their prices to make up for the cost of the program.  GDUFA was initially negotiated to have fees that would add no more than about 10 cents to every prescription.  However, over the first few years of the program, the fees (in many cases) have had double digit increases and there is no end in sight.  No telling what that per-prescription cost addition really is today, or if the generic firms have been raising their prices on a select basket of products with limited competition as a way to recoup those increased costs.  The generic companies do, after all, have a responsibility to their shareholders and investors to consider.

So the pricing dilemma may have a solution, and that solution may be time.  The questions is – how much longer is Congress and the public willing to wait?  I just caution lawmakers to not jump into a legislative fix that will have only short-term positive impact, but long-term negative consequences.  I would rather see Congress increase appropriations to the Generic program and give GDUFA some more time to bring the competition along.  Remember, Hatch-Waxman was once seen as the solution to rising drug product costs, and it took some time to work.  Let’s hope that Congress recognizes this and can find a way to use the existing legislation, along with sufficient support of the program, through public funding to make it work again.