|Articles|October 9, 2015

Are laws, regs pricing consumers out of generic drugs?

A new study by National Center for Policy Analysis (NCPA) finds that generic drugs are the best bargain in the healthcare system-but that may change if recent price hikes continue.

In "What Is Increasing the Cost of Generic Drugs? Part II: Regulatory and Legal Reasons Generic Drug Prices are Rising," author and NCPA Senior Fellow Devon Herrick says, “Compared to the funds spent on doctors and hospitals, prescription drug therapy is a cheap. Generic drugs are especially cheap; accounting for 88% of drug prescriptions filled but only 28% of expenditures on drug therapies.”

However, Herrick says that slow drug approvals by FDA are unnecessarily holding back competition that could alleviate some of the price hikes.

“Some of the recent price spikes are unavoidable as regulatory action is taken against drug makers who are out of compliance with good manufacturing practices,” he explains. “In other cases industry consolidation has driven up the prices as the number of competitors have dwindled. But some price spikes are avoidable-basically involving firms [manufacturers and distributors] gaming the system because FDA cannot respond and approve competing new drug applications fast enough.”

Also, FDA’s Unapproved Drugs Initiative (an FDA program announced in June 2006 to remove unapproved drugs from the market) is unnecessarily driving up the cost of some old drugs, Herrick says.

“I’m not blaming FDA,” Herrick says. “But if the agency could move faster on new drug applications it would definitely solve a lot of the problems with generic drug prices that are shooting up.

“Many older drugs predate the FDA’s approval process and were grandfathered, but never officially approved, he says. “Under the previous policy, drugs already on the market could be sold if the formulation, dosage and labeling for intended use all remained identical to the way it was prior to the 1938 Act. FDA now argues that few if any old drugs whose manufacturers claim grandfathered status actually comply with this requirement.”

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