Gerard Scimeca – Chairman, CASE
April 5, 2019 – https://bit.ly/2IfnhvI

In the ongoing public debate on the best way to effectuate lower prescription drug prices, all sides can at least agree that there is no “magic pill” that will solve every problem. There is, however, a growing drumbeat that lower-cost generics should play a greater role.

But price is only part of the story. What’s being ignored is a growing and troubling trend regarding the business practices of many generic drug makers that makes clear that an increased role for generics may lead us all to pay a higher price than we bargained for.

Accounting for $104 billion in yearly sales, the generic drug market has seen a rapid uptick. In 2018, the Federal Drug Administration (FDA) approved a record number of new generic drugs, and approvals are up 94 percent since 2014. Through this rapid growth, however, generic drug makers have been the focus of increased scrutiny, and not just for the exposure of certain illegal practices. Serious questions have been raised regarding price fixing and collusion, the integrity and quality of their products, taxpayer fraud, and business practices which are proving devastating to the development of new medicines.

Currently, there is an ongoing investigation by 47 state attorneys general into price fixing and collusion involving 16 generic drug makers concerning more than 300 specific drugs. This includes drugs such as the asthma treatment albuterol, sold by Mylan and Sun Pharmaceuticals, which has skyrocketed by 3,400 percent, and the much-publicized EpiPen scandal, where Mylan increased the price by 488 percent.

The EpiPen, which includes $1 worth of the drug epinephrine, has come down in price after costing $609 per box at one point, which led to a charge in 2017 by federal regulators that Mylan had overcharged Medicaid, i.e. taxpayers, by $1.27 billion. Certainly, more light will be shed on the practice of price gouging consumers and taxpayers as dozens of state investigations ensue.

And what are patients getting in return for their money? Good question. Generics do a significant amount of manufacturing overseas, especially in China and India, where manufacturing conditions are increasingly being found to be substandard and company protocols repeatedly result in unexplained data discrepancies, such as missing, lost or deleted drug-testing data.

The FDA has been flooding plants in China and India with warning letters concerning the maintenance of a clean and sterile manufacturing environment, with both countries receiving 39 of the 61 notices sent by the agency’s Office of Manufacturing Quality in 2017 alone. In India, particularly, there have been multiple instances in which generic manufacturers have skirted safety regulations rather than obeying them in earnest. It’s no wonder the country has operation and production costs running 40 percent to 70 percent lower than other developed nations.

Safety issues came to light with tragic results last year, when an Ohio man went into congestive heart failure after using a generic version of torsemide made in India. The company had been previously warned by the FDA for failing to meet proper U.S. standards. With the FDA relying on drug makers themselves to identify and report manufacturing issues, the lack of self-reporting data from overseas manufacturers will continue to raise major red flags on whether the drugs that come from overseas generic plants are effective or even safe.

Then there is the issue surrounding generics’ hostile challenges to the intellectual property of brand-name manufacturers, a business strategy designed to benefit their bottom line at the expense of patients hoping for the development of new cures and treatments. This legal though dishonest tactic, to prematurely invalidate a brand-name’s patent through a newly abbreviated challenge process has led to repeated occurrences where companies that invested heavily into the development of a new drug saw their patent rights and exclusive use negated.

While everyone agrees that competition in the marketplace is a good thing, bullying innovators with an avalanche of litigation is a sure prescription for drying up the investment needed to develop the cures of tomorrow. Thankfully, Sen. Tom Tillis. North Carolina Republican, and Rep. Bill Flores, Texas Republican, have taken notice of this suspect practice and re-introduced the Hatch-Waxman Integrity Act to stop frivolous patent challenges and protect innovators. It’s to everyone’s benefit that their efforts be successful.

As lawmakers continue to search for a solution to lowering prescription drug prices, we hope they bear in mind that there will be no easy answers as they seek to strike the right balance in the marketplace between competition and innovation. This is especially true when it comes to the push for more generics. Though generics may not carry a brand name label, in many instances they could rightly be marked “buyer beware.”