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
In a competitive market, when a price is too high, another manufacturer could begin to produce and offer the product at a lower price. However, because there is an approval process to ensure bioequivalence and quality manufacturing, this self-correction can happen only at the speed of FDA review. FDA is now working on reducing a massive backlog of thousands of generic applications from prior to 2013. The agency’s fiscal year 2014 performance report noted that none of the approximately 1500 applications for generic drugs submitted in fiscal year 2014 had been approved by the end of that year.3 Even with greater resources as a result of the Generic Drug User Fee Act, FDA will still take years to review these applications.
Calls have been made for FDA to change its standards. The agency’s approach to generic drug review, however, has been carefully built over the past several decades and is key to ensuring widespread popular and professional confidence in generic drug products. A better solution is for FDA to prioritize review of applications for essential drugs that can have a major effect on competition and affordability in the market.
Current policy already permits the agency to move up in the queue applications for generic drugs that “could help mitigate or resolve a drug shortage and prevent future shortages.”4 FDA should recognize that addressing monopolistic conditions that give rise to sudden price hikes is a means to “prevent future shortages.” If FDA perceives such a determination, which includes economic factors, to be outside of its usual area of expertise, the task of identifying applications to prioritize could fall to a different part of HHS, such as the Office of the Assistant Secretary for Planning and Evaluation.
During the 6 to 12 months of a priority review, FDA should evaluate temporary measures to restore affordability and access.
First, FDA should consider temporarily permitting compounding of the drug at issue. Compounding is the creation of medications from individual ingredients under the supervision of a pharmacist but outside of the FDA drug approval process. In implementing the Compounding Quality Act of 2013, FDA maintains a list of drug substances appropriate for compounding in bulk. The agency can include commercially available products on this list, as long as there is an appropriate justification. The existence of a pending priority review of an essential drug that can substantially improve competition in the market should serve as such a justification. There is precedent: in 2012 FDA waived enforcement action against compounded versions of hydroxyprogesterone caproate injection after the approved version became too expensive.5 In response to the recent increase in the price of pyrimethamine, one major pharmacy benefits manager has already switched to a much lower-priced compounded alternative; however, it is not known whether FDA will review this for compliance with existing compounding guidance.6
Compounded products are not an optimal solution to overcome a shortage of approved generic drugs: these products are not tested for bioequivalence, and FDA oversight of manufacturing is less than that of generic manufacturers.7 A reasonable approach would permit FDA to make a determination of whether the benefits of improved access to the drug outweigh the risks of compounding and, on that basis, permit temporary compounding during the priority review period to promote access.
A second option is to temporarily permit the importation of drug products reviewed by competent regulatory authorities and approved for sale outside the United States. For example, Glaxo, the original manufacturer of pyrimethamine, sells a version of the drug approved for use in the United Kingdom at less than $1 per tablet. FDA has used similar measures during drug shortages, including a temporary importation in 2012 during a shortage of the key anticancer agent doxorubicin.8 “Temporary importation of foreign drugs,” the FDA explained at that time, “is considered only in cases when there is a shortage of an approved US drug that is critical to patients, and the shortage cannot be resolved by manufacturers of the approved US drug in the immediate future.” The same terms could also apply to drugs facing a disruption in access due to precipitous, arbitrary price increases.
Congress should continue its investigation to illuminate the business strategies that are distorting the market for generic drugs, with a focus on eliminating price gouging. At the same time, FDA should act under its existing authority to protect the public. Moving forward would signal FDA’s commitment to protecting the competitiveness of the generic drug market. Doing so would also invalidate the business case for cornering markets on older, essential medicines and reaffirm the role of high-quality, affordable generic drugs for clinical use in the United States.