In recent weeks, the increasing prices of off-patent pharmaceuticals have been the subject of extensive news coverage and debate, a public meeting at the Department of Health and Human Services (HHS), and hearings in both houses of Congress.¹ The US Food and Drug Administration (FDA) has not played a central role to date in developing solutions to this challenge. No doubt this reflects the agency’s traditional reluctance to engage with the economic issue of drug pricing. Yet because FDA approves the generic products that establish competitive markets, the agency should have a more active role in ensuring that patients have access to essential drugs that have been affordable for many years.

The area of concern has been the off-patent drug market with limited or no competition. Although markets for some drugs remain vigorous long after patent expiration—for example, the amoxicillin market includes at least 10 different manufacturers—many other older medications are produced by only 1 or 2 manufacturers. A consequence has been an increasing frequency of drug shortages, as manufacturing problems at a single facility can quickly interrupt the national supply of a drug. Reduced competition has also led to a different kind of access problem. Several pharmaceutical companies have developed a novel business strategy of dominating noncompetitive markets for older drugs and then increasing the price substantially. Notable price hikes in the last 2 years include dramatic increases in the price of pyrimethamine from less than $1 to more than $750 a dose, the price of nitroprusside from $44 to $830 per vial, and the price of isoproterenol from $38 to $1387 per vial. Other drugs produced by 1 or 2 manufacturers may have stable prices until a shortage develops, at which point “gray-market distributors” can exploit the situation with substantial price increases.²