Prescription drug pricing has arguably become the biggest issue in U.S. healthcare. Indeed, healthcare is an “unbelievably complex subject” and resolving our country’s drug pricing problem will be no simple task. When the Trump administration submitted its Fiscal Year 2019 Budget Request to Congress in February, the proposal cited several possible solutions to combat rising drug costs.
One prominent solution highlighted in the proposed budget was generic drugs. The proposal included several provisions designed, in theory, to give the U.S. Food and Drug Administration greater ability to bring generics to market faster.
Health and Human Services Secretary, Alex Azar, has consistently mentioned the administration’s strong support for FDA efforts to spur innovation and competition in generic drug markets. During the 2018 Association for Accessible Medicines (AAM) Annual Meeting, this sentiment was echoed by the Honorable Eric Hargan, Deputy Secretary, HHS, when he called generics “vital to the future of our healthcare system.”
Generic and biosimilar drugs have rightfully earned their place as part of the solution. In the U.S., generics account for 89 percent of prescriptions dispensed but only 26 percent of total drug costs.1 Generics have saved the U.S. healthcare system $1.67 trillion in the last decade, generating $253 billion in savings in 2016 alone.1
But with far fewer financial and human resources than the branded pharma industry, generics, according to AAM President Chip Davis, are notorious underdogs. Battling public misperceptions, legislative hurdles and anti-competitive actions being taken by brand manufacturers, the generics and biosimilar industries have their work cut out for them in their quest to restore the balance between branded innovation and generic access. But, thoroughly convinced of what Davis refers to as the “unbelievable value proposition” of their products, the generics industry is not going down without a fight.
PERCEPTION IS REALITY
For those connected to the pharmaceutical industry, it may seem difficult to comprehend confusion surrounding the safety and efficacy of generic drugs. Backed by extensive bioequivalence testing, approved generic formulations must provide the same therapeutic effect as branded medicines. The FDA has clear and accessible information on the topic, stating that a generic medicine “works in the same way and provides the same clinical benefit as its brand-name version. In other words, you can take a generic medicine as an equal substitute for its brand-name counterpart.”
And yet, numerous public perception studies and literature reviews tell a different story: Many consumers still equate lower price with lower quality. A 2009 U.S. survey² found that one-third of patients were uncomfortable with generic substitution to some extent. About 10 percent believed that generic drugs could cause more side effects than brand-name drugs. While more recent surveys have noted a substantial shift towards more patients having positive views of generic drugs (in one study, 88 percent considered generic drugs to be as safe as brand-name counterparts3), negative perceptions still linger, especially amongst less educated demographics.
The generics industry’s image problem is not helped by frequent news reports of recalls, 483s and import bans connected to manufacturers based in India — the world’s largest exporter of generic drugs. In 2015, half of the FDA warning letters were sent to Indian pharma sites, which account for roughly 24 percent of the U.S. generics market.4 While significant investments in automation, training and regulatory collaboration have resulted in Indian pharma plants receiving less than a third of U.S. FDA warning letters in 20175, quality concerns still adversely affect public perception of generic drug safety.
There’s also confusion based on superficial details. Trademark laws in the U.S. prohibit a generic medicine from looking exactly like drugs already on the market. Different shapes, coatings or colors can cause confusion and, ultimately, distrust among patients — especially in the case of chronic drug treatment, where patients know and track their meds by appearance.
Whether real or perceived, misconceptions about generic drugs linger, and still present challenges for generics manufacturers.
While the generics industry has scored some recent wins on the federal level — the enactment of GDUFA II, which included the reauthorization of the Biosimilar User Fee Act (BsUFA) and the defeat of the FDA’s problematic draft drug labeling rule, to name a few — losses on the state level continue to create a challenging backdrop.
At present, 30 states have drafted news laws, dubbed “transparency” legislation, requiring manufacturers to report to the state a variety of information that is thought to justify drug price increases over specified thresholds. For example, in Oregon — the most recent state to adopt a drug transparency law — if a manufacturer wants to increase the price of a drug by 10 percent or more and it’s already priced at more than $100 per month, the drugmaker must report costs for R&D, advertising and marketing, as well as profits for the drug, whether generic alternatives are available, and what the drug costs in other countries.