Regulators aim to close loopholes that lead to higher drug prices

Regulators should close regulatory loopholes that allow certain branded-drug developers to "game the system" and thwart competition, policymakers and healthcare experts said at the U.S. Food and Drug Administration's meeting Tuesday.

The FDA outlined its efforts to increase competition in the generic-drug market at its "Hatch-Waxman Amendments: Ensuring a Balance Between Innovation and Access" meeting and took recommendations from industry leaders on how to reform policy. Drug prices drop significantly when there are four or more generic alternatives available, research shows.

"We know that branded companies are using our rules that are intended to protect consumers, or meant to make the regulatory process more predictable, and taking advantage of these rules in order to deliberately forestall the entry of expected generic-drug competition," FDA Commissioner Dr. Scott Gottlieb said at the meeting.

There are several tactics drug companies use to maintain their market share. They can employ what's known as "evergreening," where branded manufacturers develop a slightly different version of their drug to earn a new drug approval, which extends their patent without leaving a window to obtain samples for bioequivalence testing needed for generic-drug approvals. Certain branded-drug developers seek approval for their drugs to treat a rare disease and benefit from orphan drug exclusivity rights. Some also use pay-for-delay settlements that pay generic-drug companies for delaying development.

One policy suggestion included scaling back the FDA's Risk Evaluation and Mitigation Strategies program so branded-drug makers couldn't invoke REMS patents against potential generic competitors to create closed distribution networks that bar competitors from accessing product samples and performing bioequivalence tests. Healthcare experts also pushed to end pay-for-delay settlements and limit the use of citizen petitions that can delay generic drugs' development.

Ameet Sarpatwari, an instructor in medicine at Harvard Medical School, noted that as of March 2016 the FDA received 150 inquiries from generic manufacturers who were unable to get product samples. The CREATES Act and FAST Generics Act look to close that loophole and potentially save up to $5.4 billion a year in reduced drug costs.

As for citizen petitions, 40% are filed within a year of generics entering the market, signaling efforts to delay competition, he said. Also, from 2011 to 2015, 87% of the 124 citizen petitions the FDA received were from brand-name manufacturers, Sarpatwari said.

"It is fairly apparent that this is a delay tactic and not to ensure efficacy or safety," he said at the meeting.

The FDA should also allow other manufacturers 18 to 24 months to exit the market after a new drug application is approved to prevent significant price increases or drug shortages due to a lack of competition, said Wayne Russell, vice president of pharmacy at group purchasing organization Premier.

"The disruption to the market when products are required to exit as a result of the FDA's policy should not be underestimated," he said at the meeting, which is part of the FDA's broader Drug Competition Action Plan that aims to get more generic drugs to market sooner to reduce drug prices.

The agency has taken some steps to curb drug prices, including posting a list of branded drugs that are not protected by a patent and are not facing looming generic-drug competition in an effort to increase transparency and encourage generic development. It also plans to eliminate the existing orphan drug request backlog, of which there are about 200, and create a system for timely response deadlines for all future requests.

"We must make sure we support drug manufacturers who treat rare diseases and are not using orphan drug classifications as a gateway for premium pricing and blockbuster sales," said Dr. Richard Bankowitz, America's Health Insurance Plans' executive vice president for clinical affairs, adding that the FDA should also publish launch prices as part of its approval process as well as crack down on direct-to-consumer drug advertising.

The FDA is looking to fast-track its review of applications for generics, known as abbreviated new drug applications, or ANDAs, for drugs with less than four competitors—a policy move that the FDA called the first of its kind.

Waiting up to four years for an ANDA to be approved means generic developers could be paying around $1 million in facility fees before the drug is even on the market, said Ernst Berndt, an economics professor at the MIT Sloan School of Management.

"That can discourage entry to the market," said Berndt, adding that they need to recalibrate how fees are assessed.

The latest generic-drug user-fee agreement proposal, which is currently before Congress, is designed to reduce the number of review cycles for an ANDA to reach approval, Gottlieb said.

The FDA is also considering making letters publicly available that say it is OK for the branded company to sell the drug to generic manufacturers for bioequivalence testing purposes, in an effort to highlight the instances where generic-drug makers may be having trouble getting access to branded drugs, he said.

David Rosen, a former FDA official and current head of the FDA regulatory practice group at law firm Foley & Lardner, said he was encouraged by the commissioner's support of increasing generic-drug competition.

"I like the idea of a good ANDA assessment map and ways to keep the reviews of those drugs flowing, particularly with those with less than three competitors," he told Modern Healthcare.