WASHINGTON – Americans spent $373.9 billion on prescription medicines in 2014. The cost could have been much higher, according to the Generic Pharmaceutical Association. A report by the association says the savings from generic drugs reached an all-time high of $254 billion in 2014.
Fear of escalating drug prices was punctuated by the actions of Turing Pharmaceuticals, which increased the price of the drug Daraprim from $13.50 a tablet to $750 overnight. Meanwhile, the Food and Drug Administration, which approves of all drugs before they can be prescribed or sold, has a backlog of over 3,700 generic drug applications awaiting approval.
“Drug pricing is a legitimate, real concern of Americans,” said Sen. Lamar Alexander, R-Tenn., at a Senate Committee on Health, Education, Labor and Pensions hearing Jan. 28. “It’s part of a larger concern of rising health-care costs.”
Deraprim’s case has drawn attention to the subject of drug costs, both generic and brand names, but the Generic Pharmaceutical Association says generic drugs are not the problem.
“Generics drive savings,” Chip Davis, the group’s president and CEO., said at a briefing Monday at the Capitol. “Generics do not drive costs in the health-care system.”
The Department of Health and Human Services reported that two thirds of generics decreased in price in 2014. The difference in cost between generic drugs and their brand-name counterpart is 80 percent to 85 percent, according to the FDA.
The report by the Generic Pharmaceutical Association states that of the 3.8 billion prescriptions filled in 2014, 88 percent were generic. But generic drugs accounted for 28 percent of drug costs.
“I am not aware of any other industry or sector within an industry that can deliver almost 90 percent of the market demand at slightly more than a quarter of the total cost of the market,” Davis said. “It is a testimony to the success of the generic drug industry.”
The House of Representatives Committee on Oversight and Government Reform addressed the cost of drugs like Daraprim at a hearing Thursday.
Among those present to testify were former Turing CEO Martin Shkreli, who raised Deraprim’s price, and Howard Schiller, interim chief executive officer of Valeant Pharmaceuticals International. Like Turing, Valeant is responsible for drastic drug price increases.
Shkreli, who has been charged with securities fraud, took the Fifth Amendment and refused to answer any questions. He was excused from the hearing.
“When we price our drugs, we try to take into account the clinical value, the alternative therapies, patient access, among other factors. It is not an exact science,” Schiller said. “In a number of cases, we’ve been too aggressive. We’re also trying to manage a bottom line.”
“You’re taking advantage of the system,” said Rep. Jason Chaffetz, R-Utah, the committee chair, as he addressed Turing and Valeant representatives. “And that’s why, again, the pressure comes back to the government and the FDA to increase the competition so that there is a proper balance here.”
Congress wants to create more competition in the market to lower prices. The committee and generic drug makers, would like the FDA to speed up its process of approving generics to increase savings.
After the original brand drug’s patent expires, any manufacturer is free to develop its version.
As the demand for generics rose over the years, so did production. The FDA was not equipped to handle the higher number of drug applications. Lack of resources and funding led to a massive backlog. The generic industry and the FDA developed the Generic Drug User Fee Amendments designed to speed up the process.
From January 2014 to March 2015, the FDA approved just over 50 applications per month. From April 2015 on, at least 60 applications have been approved every month except for July.
“In the first two years of the program, we didn’t jump up approvals, it was pretty much up and down,” Dr. Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research, said at the Senate hearing. “We’re on a path to get these efficiently out the door now. We had to build the program, get this IT system, we had to hire and train these people.”
The user fee law is set to expire in September 2017, but negotiations have begun for a new agreement that will continue to improve the process.
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