Prescription costs to rise under new FDA rule?

The price of generic drugs would skyrocket under a proposal from the Food and Drug Administration (FDA) that would open manufacturers to lawsuits for failures to warn consumers about the potential side effects, according to a new report.

In the study released earlier this month that contradicts the FDA's numbers, conservative economic consulting firm Matrix Global Advisors found that the cost of producing generic drugs would increase by about $4 billion annually for the industry, or $1.16 per prescription, which would be passed down to consumers. 

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Industry groups say the FDA has not fully considered the costs of the rule. They argue it could prove to be too costly for manufacturers and insurers to comply with and drive some of them out of the market, reducing consumers' access to generic drugs and raising prices.

But consumer advocates say the rule is necessary to protect patients and hold manufacturers accountable for the generic drugs they make. 

"This rule jeopardizes the cost savings that generic drugs bring to the market," Matrix Global Advisors CEO Alex Brill said this week at an event hosted by the Law & Economics Center at George Mason University. "If costs go up, prices go up."

But Allison Zieve, director of litigation at Public Citizen, a consumer advocacy group, said the rule would encourage companies to take responsibility for the drugs they produce.

"Generic manufacturers are fully capable of complying," Zieve said at the conference. "By giving them more responsibility for labeling, the proposed rule will encourage vigilance."

Generic drugs account for about 84 percent of the U.S. market's prescription drugs, according to a study by IMS Health.

The labeling rule would open generic drugmakers to lawsuits. Under current law, generic drug manufacturers are not allowed to change the warning labels on their products, so they are dependent on brand name drugs to provide accurate information.

Therefore, the Supreme Court ruled in 2011 and again in 2013 that generic drugmakers can't be held responsible for labels they don't control, even though brand name drug manufacturers can be held liable.

But consumers advocacy groups say this is not fair to patients, who don't realize there is a difference in the level of responsibility between companies that manufacture brand name drugs and generic drugs.

"A patient injured today by a generic drug has no recourse for holding the manufacturer accountable," Zieve said.

The FDA weighed in last November when it proposed to change the rule and allow generic drug manufacturers to also change their labels, so they are on a level playing field with brand name drugs.

But generic drug companies have protested the decision. They say the rule could force many of them out of the market and raise prices for consumers. The rule could also lead to generic drugmakers "over warning" patients on the labels, which could confuse doctors who are trying to prescribe the best medication for their patients.

"It's just as problematic to over-warn and to scare away individuals who would benefit from the medicine," said Sheldon Bradshaw, a lawyer at Hunton & Williams, who also spoke at the conference.

But the Matrix Global Advisors study comes in stark contrast to the FDA's estimate of no more than $25,852 in net annual social costs.

Brill, who has ties to the conservative American Enterprise Institute, said the FDA's failure to acknowledge the greater costs that he believes there will be is the "most troubling" part of the rule. But Zieve disagreed.

"There are not just costs to companies," Zieve said. "There are costs to patients and injuries that could have been prevented, if there were better labeling information."