Did Someone Forget User Fees?

I just read the Association for Accessible Medicines’ (AAM) White Paper entitled “Ensuring the Future of Accessible Medicines in the U.S.,  Avoiding Shortages & Ensuring Competition for America’s Patients” (here) that is being entered into the record at the FDA-sponsored meeting  Identifying the Root Causes of Drug Shortages and Finding Enduring Solutions held on November 27th in Washington DC. (see here for more information).

I am impressed by the foresight of the AAM in discussing a broad range of issues that impact generic drug pricing and availability. However, I found multiple things missing in the discussion, and one of them being the impact of rising user fees.  Since the beginning of the Prescription Drug User Fee Program, fees have skyrocketed – this is also the case for the Generic Drug User Fee Program.  As these fees continue to rise, the downward price pressure on generic drugs continues. There may come a breaking point at which time some smaller generic manufacturers must get out of the business, cut certain unprofitable products, or hope to be acquired by another company.  Certainly, all manufacturers will have to raise prices just to cover the cost of the increasing fees.  A price increase will be an addition to increased operating costs which includes salaries, cost of bottles, packaging, labeling, APIs, inactive ingredients, capital expenditures for new equipment and replacement of existing aging equipment, plant expansion, and equipment to meet the serialization requirements.

The issue of consolidation in the industry also needs to be discussed, since when a smaller company gets acquired or even if it is an acquisition or merger of two larger generic players, inevitably the product line is reduced to get rid of either low profit products or duplication of products in the portfolio, which also has a tendency to decrease competition and increases the chances for drug shortages as there becomes one less market source of supply.  Depending on one company’s market share, any one or two of these scenarios could lead to a shortage of a product in the market or pressure to increase prices to take advantage of fewer competitors.  Yes, the FTC evaluates such acquisitions to try to avoid these types of problems occurring, but in a year or two after the deal is done, where is the FTC?

Needless to say, the shortage problems and pricing issues are multifaceted, however, many of those issues are being addressed. Don’t fool yourself into thinking that some of the issues are not being addressed or those that are not being talked about could turn into the real culprits of shortages and increased consumer costs if they are not also part of the discussions. Remember, it was not too long ago (1992 for brand name drugs and 2012 for generic drugs) where the review and approval process was funded wholly by appropriated funds.  And if you think that these costs are not being passed onto consumers, I say- think again.  The old saying, “you can pay me now or pay me later” comes to mind!