Why hamper generic drug market?

This week, under the leadership of Sec. Burwell, the Department of Health and Human Services (HHS) will host a Pharmaceutical Forum that will among other topics feature discussions about how to boost patient access to affordable medicines and encourage competition. It is important that everyone stays mindful of one industry that continues to demonstrate remarkable success in both of these areas – generic pharmaceuticals.

Generic drugs live at the intersection of innovation and affordability, increasing patient access to essential medicines and generating cost savings. Over the last 10 years, generics saved the United States $1.68 trillion. That’s $254 billion in 2014 alone, according to the new Generic Drug Savings in the U.S. report by the IMS Institute for Healthcare Informatics (on behalf of the Generic Pharmaceutical Association (GPhA)). Generic drugs now comprise 88 percent of total prescriptions in the United States, but remarkably only account for 28 percent of pharmaceutical expenditures.

{mosads}It’s hard to imagine another sector that can claim nearly 90 percent of a market while delivering it at nearly a quarter of the total cost. Knowing this, it is difficult to understand why Congress recently changed the Medicaid rebate framework so that it risks billions of dollars in patient savings by imposing brand drug rules on more affordable generics.

Much has been said recently regarding Turing Pharmaceuticals and the price increase for its product, Daraprim. Congress, in an effort to address egregious, outlier behavior like that of Turing, finalized a budget agreement that included an increase in the Medicaid rebate for generic drugs. However, Turing is not a generic drug company. Turing is a brand drug company and Daraprim is a brand drug without Food and Drug Administration (FDA)-approved competition.

It should surprise no one that Turing leadership publicly supported this Medicaid rebate change on social media because it does not apply to Turing or similar companies with older off-patent brand products, at all.

This Medicaid rebate increase will add significant hurdles to generic drug investment and development, making it more challenging for generics to serve as a viable alternative to more expensive brand medications for patients and payors – the exact opposite of what both patients and payors need.

The new rebate structure fails to reflect very clear differences in the brand and generic business models. In order for generics to be sold at a fraction of the brand drug cost, generic drug makers embrace a high volume and low margin business model that is vastly different from the brand model. This means that generic manufacturers are subject to materials cost and supply fluctuations to a much higher degree than most brand manufacturers.

Medicaid savings from generic drugs in all 50 states and the District of Columbia lower program costs and ease the burden on taxpayers while enabling access for millions of beneficiaries. Under the existing system, Medicaid saved $33.5 billion in 2014 because of generic drugs, according to the 2015 Generic Drug Savings in the U.S. report. In fact, without generic drugs, prescription drug costs for Medicaid would have nearly doubled in 2014.

Applying a brand Medicaid rebate to generic products can constrict generic drug development and puts Medicaid beneficiaries, some of our nation’s most vulnerable patients, in a position where they may have no alternative but to rely on costly brand drugs, at the same time increasing state budgets and creating a burden for taxpayers.

Fortunately, there is a smarter way forward that brings about more savings and does more to curb unsavory business practices that delay generics from reaching the people who need them.

A bipartisan bill, the Fair Access to Safe and Timely (FAST) Generics Act, would generate $2.4 billion in savings, according to the Congressional Budget Office. It would also take important steps to prevent the misuse of Risk Evaluation and Mitigation Strategies (REMS), FDA patient safety programs being used by some brand companies to block generic competition.

The Medicaid rebate increase for generic drugs in the budget deal is bad for Medicaid and its beneficiaries, bad for taxpayers, and it should be immediately repealed.

Generic drugs provide one of the most reliable levers against rising health costs. If Congress really wants to increase health savings and expand patient access, policymakers would be wise to embrace policies that increase prescription drug competition from generic drugs.

Davis is the president and CEO of the Generic Pharmaceutical Association.


The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.

Most Popular

Load more


See all Video