The Official Medtipster Blog

www.Medtipster.com Source: US Government Accountability Office, January 31 2012

What GAO Found

Our review identified articles that used varying approaches to estimate the savings associated with generic drug use in the United States. One group of studies estimated the savings in reduced drug costs that have accrued from the use of generics. For example, a series of studies estimated the total savings that have accrued to the U.S. health care system from substituting generic drugs for their brand-name counterparts, and found that from 1999 through 2010 doing so saved more than $1 trillion. A second group of studies estimated the potential to save more on drugs through greater use of generics. For example, one study assessed the potential for additional savings within the Medicare Part D program—which provides outpatient prescription drug coverage for Medicare—and found that if generic drugs had always been substituted for the brand-name drugs studied, about $900 million would have been saved in 2007. A third group of studies estimated the effect on health care costs of using generic versions of certain types of drugs where questions had generally been raised about whether substituting generic drugs for brand-name drugs was medically appropriate. Unlike the other two groups which focused on savings on drugs only, these studies compared savings from the lower cost of generic drugs to other health care costs that could accrue from their use, such as increased hospitalizations. The studies had mixed results regarding the effect of using these generics in that some found they raised health care costs, while others found they led to cost savings.

Why GAO Did This Study

Prescription drug spending in the United States reached $307 billion in 2010—an increase of $135 billion since 2001—and comprised approximately 12 percent of all health care spending in the country. Until the early 2000s, drug spending was one of the fastest growing components of health care spending. However, since that time, the rate of increase has generally declined each year, attributable in part to the greater use of generic drugs, which are copies of approved brand-name drugs. Generic versions of brand-name drugs become available to consumers when brand-name drugs’ patents and periods of market exclusivity expire and generic manufacturers obtain approval to market their drug. The competition that brand-name drugs face from generic equivalents is associated with lower overall drug prices, particularly as the number of generic manufacturers grows and price competition among them increases. On average, the retail price of a generic drug is 75 percent lower than the retail price of a brand-name drug.

Increased use of generic drugs can partly be attributed to the regulatory framework that was established in the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act. The Hatch-Waxman Act facilitated earlier, and less costly, market entry of generic drugs, while protecting the patent rights of brand-name drug manufacturers, to encourage continued investment in research and development. When the act was enacted in 1984, the generic utilization rate—which is the share of all drugs dispensed that are generic—was about 19 percent. Today it is about 78 percent for drugs dispensed in retail settings, such as independent, chain, and mail-order pharmacies, as well as in long-term care facilitates. The generic utilization rate is expected to continue to grow over the next few years as a number of blockbuster drugs come off patent through 2015.

For a complete copy of the GAO report, visit: www.gao.gov/assets/590/588064.pdf

www.Medtipster.com Source: www.post-gazette.com, 12.16.2010

Generic-drug companies, led by Teva Pharmaceutical Industries, would face fewer factory inspections and save as much as a year developing products in exchange for paying fees for the first time under a Food and Drug Administration proposal.

The plan grew out of talks between the FDA and drug makers to speed reviews of low-cost copies of medicines, according to Russell Wesdyk, scientific coordinator in the FDA’s Office of Pharmaceutical Science.

Generic-drug reviews take 15 months longer on average than evaluations of brand-name products, according to the Generic Pharmaceutical Association, a Washington lobbying group. Inspections take as many as 12 months to complete, especially for products made outside the U.S., said Richard Stec, vice president of global regulatory affairs with Perrigo Co., an Allergan, Mich.-based member of the trade group.

“Getting the inspection scheduled in a timely manner is probably the biggest challenge both for FDA and for industry,” Mr. Stec said.

The FDA may waive “preapproval inspections” done after companies submit generic-drug applications, Mr. Wesdyk said last Thursday. Instead, it would rely on periodic inspections that focus on firms’ broader manufacturing practices.

The agency would still carry out preapproval inspections under the proposal when drugs are made with untested technologies or produced at a site the FDA hasn’t inspected.

More generic-drug companies are moving operations outside the U.S., making it harder for the FDA to keep pace, Janet Woodcock, director of the agency’s Drug Center, said during a September meeting to discuss the fees. The FDA inspects U.S. plants once every 30 months, compared with once every nine years for foreign plants, a September Government Accountability Office report states.

The FDA receives 800 to 900 generic-drug applications each year, compared with about 100 applications for new brand-name drugs, Mr. Wesdyk said.

The volume of work means “even with additional resources, it would be very difficult to do the number of preapproval inspections,” said Peter Beckerman, a senior adviser in the FDA’s Office of Policy, who is leading the generic-drug user fee negotiations for the agency.

Brand-name drug makers have paid the FDA fees since 1992 to help fund faster reviews.

The FDA hasn’t presented the proposal to generic-drug companies, Mr. Stec said. In addition to the Generic Pharmaceutical Association, groups involved in the fee talks include the Generic User Fee Coalition — consisting of Perrigo; Teva, Hospira of Lake Forest, Ill.; and Apotex of Toronto — and Mylan, which developed its own fee proposal.

The Generic Pharmaceutical Association and the User Fee Coalition have agreed on a system that would set targets for drug reviews and deal with the backlog of applications through separate funding, Mr. Stec said. He declined to discuss other details.

Mylan, based in Canonsburg, has pressed for a plan in which manufacturers and suppliers of active ingredients pay inspection fees in addition to fees for new applications. Mylan President Heather Bresch said her company’s proposal would generate $30 million for the FDA to standardize the frequency of inspections in the U.S. and overseas.

“You’ve got to level the playing field,” Ms. Bresch said in an interview in Washington last month. “I’m just realistic about the economic situation. Our industry is going to have to subsidize the globalization of the FDA.”

The generic-drug association and the user-fee coalition are considering Mylan’s proposal and want to reach a consensus early next year, Mr. Stec said.

The FDA plans to begin discussions with the industry early next year, Mr. Wesdyk said. Any agreement would have to be approved by Congress.