Why are inexpensive generic drugs not getting to market as fast as they could?

Pay the piper

Why is healthcare in the U.S. so expensive?

The complete answer to that question would require volumes. And when you were done writing those volumes you’d have to begin revisions immediately.

But here’s one of the reasons why healthcare costs are so high: Inexpensive generic drugs are not getting to market as fast as they could.

Fair Game

When a drug’s patent runs out, any drug maker is free to manufacture a new brand – a generic – using the original drug’s active ingredient.

Personally, this doesn’t seem fair to me. If you run a drug company that devotes a great deal of time, energy and many millions of dollars to developing a drug and bringing it to market, that drug is all yours for only a few years. After that, the market is up for grabs. Fair or not, though, that’s the way the system works. And, of course, the consumer benefits when several brands of a popular drug eventually become available, lowering the cost considerably.

Last year, Lester M. Crawford, the Acting Commissioner of the FDA, stated that if Americans bought generics instead of their brand-name counterparts, the combined savings would be about $17 billion per year.

And we’d save even more if the FDA would get in gear and process the backlog of more than 800 applications for new generic products.

Hunky dory

In a recent Washington Post article, reporter Marc Kaufman offers a glimpse into the mysterious inner workings of the FDA.

Kaufman interviewed Gary Buehler, the FDA director of the Office of Generic Drugs (OGD), who noted that the backlog of generics waiting for approval will get even larger this year because his staff won’t increase, but the number of applications will. The OGD received 129 new applications in December 2005 – the highest number ever in a single month.

So how about putting a few more staff members in there to move things along? That would be cost-effective for consumers and government alike. According to Mark B. McClellan, director of the Centers for Medicare and Medicaid Services, generic drugs are “essential” to controlling costs for both seniors and the government in implementing the Medicare prescription drug program. It’s a no-brainer, right? Let’s beef up the staff and get a move on. Everybody wins.

Inexplicably, however, FDA head Crawford told Congress last summer that generic deadlines were being met and there was no need for additional staff. He said, “The system seems to be working.”

Notice he didn’t say whom the system is working for.

Some kind of crazy

Kaufman reports that one of the new ideas for bankrolling new hires for the OGD is an old idea for the FDA: user fees.

The 1993 Prescription Drug User Fee Act allows the FDA to charge drug companies a fee to review new products. The fees pay about half the cost of product review. In exchange, the FDA promises faster processing of new drug applications.

But this proposed solution might be part of the problem.

In a 2002 Paul Stolley, M.D. (who has served on several FDA advisory committees), told WebMD: “When you pay a regulatory agency’s bills and negotiate with them from year to year, you achieve a little clout and can capture that agency.”

Kathleen Jaeger, president of the Generic Pharmaceutical Association, told Kaufman that the situation is “kind of crazy.” She notes that generic reviews are less complicated and supposed to go faster than new drug reviews, but on average the generic reviews take longer than new drug reviews.

So let’s connect the dots. The drug companies have been paying user fees for more than a decade. Drug companies that hold patents benefit financially when generic applications are delayed. The OGC needs more employees to expedite reviews of the expanding backlog of generic applications. But Congress was told that no additional employees are needed in the OGC.

You have to wonder: In spite of the fact that billions of dollars might be saved each and every year, could the dysfunction in this system be deliberate?

Sources:
“Generic Drugs Hit Backlog at FDA” Marc Kaufman, Washington Post, 2/4/06, washingtonpost.com