Opinion

The CREATES Act Will Destroy Innovation in the Health Care Industry

With little fanfare, Congress may significantly change how companies discover lifesaving medicines. In creating a stifling government apparatus, the Creating and Restoring Equal Access to Equivalent Samples Act would have drastic, unintended consequences for taxpayers. Provisions in the act, which is up for a vote in the coming weeks, could lower safety standards, stifle innovation, and undermine intellectual property rights. Large resulting increases in costly litigation will slow the development of new treatments and increase healthcare costs for all.

The CREATES Act proposes unneeded and potentially harmful changes to the Risk Evaluation and Mitigation Strategies, a Food and Drug Administration safety protocol that uses testing to ensure that benefits of certain prescription drugs outweigh their risks. Under the proposed changes, generic manufacturers would be allowed to bypass this measure and require only “comparable” protections, which may be less onerous than FDA processes. In effect, the federal government would hold generics and non-generics to entirely different standards, ensuring favoritism over dynamic competition.

This should raise eyebrows. Changing REMS means generic manufacturers will not be held to the same standards of testing or safety when bringing drugs to market. This bestows an important regulatory benefit onto generic manufacturers, and ensures that brand-name developers will be at a further disadvantage in bringing products to market. Given the tremendous incentive that intellectual property allows in developing cutting-edge medicines, giving an artificial edge to generics is particularly ill advised. But the damage to intellectual property doesn’t stop there. Proposed changes to REMS strikes language that acknowledges an innovator’s IP rights in REMS and conflicts with IP rights provided by other laws. Taxpayers and patients who fund the government deserve a healthcare system that rewards creativity and ingenuity, instead of a rigged stagnant market.

Under the new legislation, the scales are tipped significantly against innovators by holding them to a higher standard than their competitors. Existing regulations under REMS carefully balance negotiations for sharing samples of drugs between innovative pharmaceutical companies and manufacturers looking to develop generic options. Unfortunately, the current legislation undermines this balance.

The CREATES Act also eases the burden for litigation and incentivizes generic manufacturers to sue innovators rather than participating in constructive negotiation to obtain access to drug samples. Worse, the bill provides for windfall damages, which could lead to generic companies earning more from a winning lawsuit than they would have if they had actually sold the generic of the medication. This legislation would add confusion and meritless litigation to our already complicated healthcare system. Worse yet, it would foster a perverse incentive for companies to sue rather than create, produce, or otherwise contribute to the American economy.

The ultimate effect of this will not be—as some of the bill’s supporters have claimed—reductions in the cost of medicines, but rather the opposite. A more burdensome, litigious system will only succeed in driving up costs and stifling innovation. Under this new regime, innovative companies may find that instead of profits, they have nothing to look forward to at the end of long and laborious multibillion dollar projects but costly litigation.

The CREATES Act will not reduce the cost of drugs but will instead create a cumbersome business environment that hinders innovation and economic growth. Serious proposals to reduce costs of pharmaceuticals and healthcare more broadly must focus on increasing competition in a way that encourages medical advances, and limits merciless litigation. The CREATES Act fails on all of these counts.

 

Ross Marchand is a policy analyst with the Taxpayers Protection Alliance.

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