Additional Congressional Action Needed to Help Prevent Future Generic Drug Price Spikes

Price spikes for critical generic drugs continue to jeopardize patient access to health care and generate due bipartisan scrutiny on Capitol Hill. Though Congress has taken positive initial steps to help prevent the next Mylan – or Valeant, or Turing – additional action is needed to help increase competition in the generic market and mitigate future price spikes.

Health care providers and the patients they serve have long relied on generic drugs to reduce costs and increase access to essential medications. According to the National Bureau of Economic Research, within the first three years of the launch of the first generic competitor to a brand name product, the average generic drug has 12 competing manufacturers and the price decreases by 94 percent.

Despite this, the problem of generic price spikes persists and is increasingly occurring where there are two or fewer manufacturers for a product on the market. This lack of competition allows high prices to go largely unchecked.

A July 2016 Journal of the American Medical Association report found that at least four generic competitors are needed to ensure healthy markets, and that many treatment fields fall short of this threshold — for example, only two-thirds of cancer drugs have at least one generic.

Compounding the problem is the backlog of abbreviated new drug applications and the median review time for product approval at the U.S. Food and Drug Administration. Product approval time has consistently grown, from 30 months prior to 2011, to 26 months in 2013, to an estimated 42 months in 2014. A three- or four-year wait time stifles the ability of manufacturers who want to introduce competition into the market.

Increased competition in the generic drug market is critical to preventing and mitigating price spikes. But what specifically should be done?

As part of a September U.S. Government Accountability Office report on generic price spikes in the Medicare Part D program, manufacturers confirmed that the current backlog may be a barrier to market entry for new generic drug manufacturers and that competition could be increased if FDA would approve more ANDAs.

Senators Collins (R-Maine) and McCaskill (D-Mo.) have introduced bipartisan legislation, the “Increasing Competition in Pharmaceuticals Act” (S. 2615), which mandates FDA priority review of ANDAs for products with only one manufacturer. HSCA and our health care group purchasing organization members support this legislation and think it is an important step to help increase competition.

Congress should also consider mandating priority review for generic injectable drugs with two or fewer manufacturers. Generic injectables are the workhorses of acute care facilities and bring great value to health care providers and patients.

In addition, we urge Congress to mandate priority review of an ANDA in instances where there have already been significant spikes — specifically, where the market price of an existing product increases at a rate of more than five times the percent change that occurred in the Prescription Drugs Index of the Consumer Price Index for the previous year.

Common-sense policy solutions such as these will help foster competition, remove barriers to entry for new manufacturers, and help keep future price spikes in check.

Todd Ebert, R.Ph., is CEO of the Healthcare Supply Chain Association, which represents the sourcing and purchasing partners to hospitals, long-term care facilities, surgery centers and clinics.

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