Detailed plan outlines nine suggested actions Congress and the administration should take to create healthier and more competitive pharmaceutical markets
WASHINGTON, D.C. — Premier Inc. (NASDAQ: PINC), a leading healthcare improvement company, today released nine policy recommendations designed to stimulate competitive markets for pharmaceuticals. Premier believes these reforms provide a holistic approach to achieving a high-quality, cost-effective pharmaceutical industry, while correcting regulatory loopholes that impede competition and directly lead to unsustainable price increases.
“By and large, skyrocketing drug costs are a result of unhealthy markets that lack competition,” said Michael J. Alkire, chief operating officer, Premier. “Today, monopoly players can raise prices at will – even for generic drugs – by hundreds of percentage points, creating expensive medications without true added value. This adversely impacts providers, payers and patients. We are at a tipping point in healthcare spending, and if we are serious about reducing costs and addressing unsustainable expenses, drug prices must be part of the discussion. This is an urgent matter and we strongly urge Congress to enact our recommended policies.”
A wealth of research and insights prove that competition in the pharmaceutical marketplace is a powerful antidote to rising costs. According to the Food and Drug Administration (FDA), when two or more generic drug makers enter the market, prices fall to 52 percent of the original price, and continue to drop as more competitors enter the market.
However, in too many cases, competition that brings drug prices down is lacking. In some cases, the slow FDA drug approval process inadvertently fosters monopoly markets while competitors move through a review system that can last up to four years. This unfair advantage provides incumbent manufacturers an opportunity to raise prices in the interim. In other cases, companies have made it a business strategy to block competition in order to preserve or raise high prices.
These market dynamics led Premier to develop the following recommendations, which can be implemented in combination or as stand-alone reforms.
- Speed the FDA’s drug approval process: Congress should require the FDA to prioritize review of generic drug applications when there are three or fewer manufacturers in the market, and ensure decisions for these applications are made within 240 calendar days, as stipulated in the “Making Pharmaceutical Markets More Competitive Act.”
- Prohibit manufacturers from misusing the Risk Evaluation and Mitigation Strategy (REMS) to limit competition: Manufacturers have used the FDA’s REMS program to create restrictive distribution networks that deny generic drug makers access to samples for bioequivalence studies, which are required for the drug approval process. Congress should stop these anticompetitive practices by prohibiting manufacturers from restricting access to covered products, as called for in the CREATES Act.
- Eliminate pay-for-delay deals: Some branded manufacturers sidestep competition by offering to pay generic companies to delay or scuttle plans to bring lower-cost alternatives to market. These anticompetitive deals cost consumers and taxpayers an estimated $3.5 billion in additional drug costs every year, according to the Federal Trade Commission, and should be outlawed by Congress, as called for in the Preserve Access to Affordable Generics Act.
- Ensuring access to biosimilars: The ability to safely substitute biosimilars for innovative biologics will be critical to competition. FDA guidance should clearly explain that applications demonstrating the same clinical results as the reference product are interchangeable and granted biosimilarity status. In addition, the guidance should allow applicants to conduct interchangeability studies using products obtained from any market, rather than limiting these studies to U.S. licensed products that often cost much more than those from other countries.
- Prevent abuses of orphan drug status: Orphan drug status creates incentives for manufacturers to develop drugs that assist in the treatment, diagnosis or prevention of rare conditions. However, the designation is abused when companies apply for and win orphan drug status, only to expand its use to other indications. Congress should consider limiting orphan status to new drugs, and prohibit the designation in cases where there is a reasonable likelihood the drugs will be used beyond the orphan population.
- Crack down on product evergreening: To extend the life of a patent, some manufacturers seek new drug approval for a changed formulation of the original, such as an extended release or changed dosage version. Once approved, the original drug is pulled from the market, leaving no opportunity to obtain samples for bioequivalence testing. This practice should be barred, and Congress should study the evergreening practice to determine whether regulatory or legislative changes are needed to continue to advance generic drug competition.
- Prevent abuse of Citizens Petitions: Manufacturers seeking to block generic entry can file frivolous citizens petitions, contributing to the FDA’s application backlog and delaying market entry by months. According to an analysis, brand manufacturers, not consumer groups, were behind 92 percent of all citizens petitions, and 90 percent of them were rejected. To help address this problem, petitions should be required to be filed by the principles, not front groups or consultants that mask identity. Further, frivolous petitions should be subject to financial penalties that disincent this anticompetitive behavior.
- Ensuring safe, decades-old drugs are still available to consumers at reasonable prices: The FDA has launched initiatives to encourage formal approvals for older, grandfathered products. As part of this process, the FDA requires competing manufacturers to exit the market once a New Drug Application (NDA) is approved. When these manufacturers leave the market, providers have experienced significant price increases due to the lack of competition. FDA should allow other manufactures 18 to 24 months to exit the market after announcing the approval of an NDA.
- Generic drug labeling: Under current law, brand and generic versions of a drug are required to carry the same labeling. However, the FDA has proposed a new rule that would change this requirement by making both brand and generic makers responsible for their own labeling. This will create different labels for equivalent products, resulting in confusion that could undermine generic prescribing. Instead, the FDA should be responsible for reviewing all safety information and serving as the central authority for uniform labeling.
“With a new administration and Congress, now is the time to hit the reset button and make some common sense changes to the current laws in order to drive greater competition in the market. There has been a lot of talk and promises made to voters and taxpayers, who are looking to Congress for actions that will finally address overwhelming price increases in the drug market,” said Alkire. “These proposals should not be controversial – we should all welcome reforms that foster competition and opportunity. Finally, while this is not a legislative or regulatory request, we strongly urge the pharmaceutical industry to take additional steps to test the relative effectiveness of their new drugs. New does not necessarily mean better, and providers need more evidence-based information to determine which product produces the best results for their patients.”