Why does the US face high-priced generics and drug shortages? Posted 15/05/2020

Healthcare budgets in the US are under strain and the cost of prescription drugs is a continuous concern. Generic drugs offer cheaper alternatives to brand-name products due to competition. However, in recent years generics prices have risen in the US and there have been shortages of products.

Tactics to prevent generic market entry
Brand-name drug manufacturers often engage in a number of activities to delay or prevent generics market entry. These include ‘product-hopping’ which involves developing a reformulation of their original product which prevents automatic switching to a generic drug version. Brand-name drug manufacturers can also acquire secondary patents, which extend patent life by almost seven years on average [1]. In addition, brand-name and generics manufacturers use ‘pay-for-delay’ settlements to delay generics entry. Brand-name drug manufactures also release ‘authorized generics’ that compete with US Food and Drug Administration (FDA) approved generics. Additionally, they use citizen petitions, which utilize US citizens’ opinions on drug products. Finally, brand-name drug manufacturers invoke risk evaluation and mitigation strategies (REMS), refusing to provide generics companies with information on their products, and refusing to meet generics manufactures to discuss the FDA’s required REMS programmes.

Low generics competition and high drug prices
In general, when a brand-name product has high sales, it will encounter more competition from generics when the market is open to them. This leads to lower product prices. However, some generics markets have seen a rise in prices. This can be due to mergers and acquisitions of companies that has led to reduced competition. There have also been many, often smaller, generics companies exiting the market. The most notable price increases have been among drugs in monopolistic or duopolistic markets. In addition, drug products with few competitors are susceptible to shortages, which can in turn, lead to price rises.

Some drugs also remain expensive despite competition. This is largely due to low substitution of the generic drug product(s) which is influenced by contracts between brand-name drug manufacturers, pharmacies and insurers. Until recently, some contracts contained a ‘gag clause’ that restricts pharmacists from informing patients if a cheaper drug is available if not paid for by insurance. Drug coupons are also often available to patients for brand-name drug products, these lower out-of-pocket costs prevent generics uptake.

US FDA action and prospects
FDA has taken action to mitigate the problems associated with high-priced generic drug products. The effects of FDA’s approach are not yet certain, but it is hoped that it will lead to more affordable medicines being available to patients. There are also a number of additional measures that could be considered in the future. Overall, and to aid with policy solutions, a deeper understanding of the strategies used by brand-name drug manufacturers to undermine generics competition and the reasons behind drug price increases is needed.

Conflict of interest
The authors of the research paper [1] declared that no funding was received for this work.

Reference
1. Gupta R, Shah ND, Ross JS. Generic drugs in the united states: policies to address pricing and competition. Clin Pharmacol Ther. 2019 February;105(2):329–37.

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