Creating a Competitive Marketplace that Works for Patients
U.S. patients, payors and the health care system are spending billions of dollars more on prescription drugs than necessary — $31.7 billion, according to a new report released by the Coalition for Affordable Prescription Drugs (CAPD). At a time when so many Americans say that out-of-control health care costs are their top policy concern, the prospect of saving patients money should have policymakers’ full attention. We applaud recent Congressional action and focus on timely generic competition as brand drug companies’ gamesmanship is costing U.S. patients far more than we imagined.
Hatch-Waxman, the 1984 law that created our modern system for prescription drugs, has successfully helped to incentivize innovation in new medicine and improve access to affordable generic drugs. Over time, however, brand manufacturers have engaged in increasingly complex tactics to delay generic entry. As a result, U.S. patients, taxpayers, and the health care system are footing the bill for sustained brand drug monopolies and higher drug prices.
Some of the ways that drug companies delay competition to extend their monopoly pricing power – such as REMS abuse – have become familiar to policy experts. But brand firms engage in numerous and varied tactics, and the total impact of these anticompetitive actions on the U.S. health care system and patients’ pocketbooks was not previously well understood.
The new Matrix Global Advisors (MGA) report, released this week by CAPD, details the wide variety of anticompetitive tactics that brand firms deploy to extend their monopolies. Pointing out that large-market drugs have seen their average monopoly period grow by 2.2 years, the MGA analysis estimates savings up to $31.7 billion for the health care system if the trend in brand monopolies is reversed and market access for affordable generic drugs is accelerated. The bottom line — there is a huge opportunity for both patients and payors to get the medicine they need and save money.
There are numerous strategies employed to delay generic entry, each deserving of careful study. In the report, MGA groups brand drugmakers’ gamesmanship into four broad categories:
- Patent/Exclusivity Tactics. For example, the practice of seeking late-stage and secondary patents that allow companies to build a “fortress” around their products and block competition for decades at a time.
- Regulatory Tactics. For example, not updating the Orange Book listings of marketed products and their associated patents that generic drugmakers rely on in the approval process.
- Market Tactics. For example, the practice of “evergreening,” where brand companies make inconsequential changes to a drug and then move patients to the new drug to extend their monopoly protection.
- Litigation Tactics. For example, triggering additional 30-month stays on generic approval in order to delay competition as long as possible.
While there have been plenty of proposals put forward, increasing generic competition is the most powerful tool Congress or the Administration can rely on to keep drug prices low. We applaud efforts by Senators John Cornyn (R-TX) and Richard Blumenthal (D-CT), among others, who are putting forth real and meaningful changes that could improve competition and reduce the current gamesmanship we see by the drug manufacturers. The current system was built to harness competition to deliver more affordable prescription drugs to Americans. That system can continue to work for decades to come, but only if Congress preserves the competitive foundation that undergirds it. By doing so, we can unlock over $30 billion in savings for American patients and the health care system they rely on.