By Michelle Meadows
You might think that lower cost means lower quality, but that's not the case with prescription drugs, says Gary Buehler, R.Ph., director of the Food and Drug Administration's Office of Generic Drugs. "The FDA ensures a rigorous review of all drugs, and consumers can be assured that generic drugs are as safe and effective as brand-name drug products," he says.
Generic drugs are copies of brand-name drugs and are available in both over-the-counter (OTC) and prescription form. For example, ibuprofen is the generic version of the OTC pain medicine Advil. Last year, the FDA approved the first generic of the prescription diabetes drug Glucophage (metformin). Generics have the same quality, safety, and strength as branded medicines. But for an average brand-name drug that costs $72, the generic version costs about $17.
At roughly one-third the price of brand-name medications, generics can bring consumers significant savings. A 2002 study by the Schneider Institute for Health Policy at Brandeis University in Waltham, Mass., concluded that if Medicare increased the rate of generic usage to that of similar high-performing private sector plans, its 40 million beneficiaries could see potential savings of $14 billion in 2003.
Because generic drugs play a key role in making health care more affordable, FDA Commissioner Mark B. McClellan, M.D., Ph.D., has made it a priority to encourage their availability. FDA experts say there is no question that brand-name drugs are also essential.
"Generic drugs are possible only as a result of the development of new innovative drugs, and this innovation requires significant investment," McClellan says. "Without fair compensation from meaningful patent protection, drug research and development would slow or stop." According to the Boston-based Tufts Center for the Study of Drug Development, the cost to develop a new drug averages $897 million. The Pharmaceutical Research and Manufacturers of America (PhRMA) reports that its member companies invested about $32 billion in 2002 in discovering and developing new medicines.
A brand-name company submits information to the FDA on patents it holds on a drug and their expiration dates. Then the agency lists patents on new drugs in the publication Approved Drug Products with Therapeutic Equivalence, also known as the Orange Book. Patent protection gives brand-name companies, also known as "innovator" companies, the sole right to sell a drug for a certain period of time. This allows them to fairly recoup their investment costs. Patent protection for drugs typically lasts an average of 11 years. A generic drug can only enter the market after the brand-name patent or other marketing exclusivities have expired and FDA approval is granted.
But rising drug costs remain a major challenge for consumers, especially older Americans. "This is where generics play an essential role," McClellan says. "Once the appropriate patent protection has expired, generic medicines give patients an alternative."
On June 12, 2003, the FDA, along with Health and Human Services Secretary Tommy G. Thompson, announced new FDA regulations aimed at streamlining the process for improving access to generic drugs. The move is expected to save consumers $35 billion over 10 years, as well as lower costs for state Medicaid programs and employer-provided coverage.
To supplement the regulation, the FDA also launched an initiative called "Improving Access to Generic Drugs." The initiative involves revamping the FDA's review process to put generic drugs into consumers' hands more quickly. President Bush's fiscal year 2004 budget request increases funding for the FDA's generic drug program by $13 million, the largest ever for that program. The additional funds would go toward speeding up generic drug reviews. This funding request would increase the 2003 generic drug budget of $45 million by roughly one-third. According to McClellan, "All of these generic drug reforms are important for the protection of public health in this country."
The main reason generic drug companies can market their drugs at lower prices is that they don't face the same development costs as brand-name companies. Under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, generic drug companies don't have to repeat expensive clinical trials.
"The Hatch-Waxman Act essentially created the generic drug industry," says Buehler. Roughly two decades ago, generics made up only 12 percent of all prescriptions. Now, generics represent almost 51 percent of all prescriptions in the United States, according to the Generic Pharmaceutical Association (GPhA). "The law paved the way for many more generic drugs because rather than repeating research, generic drug companies instead must show the FDA that their drugs are bioequivalent to the brand-name drug," Buehler says.
When a drug is "bioequivalent" to another, it means that its active ingredient works in the same way and in the same amount of time as the brand-name drug. Scientists measure a generic drug's bioavailability--the amount of the generic drug in the bloodstream and how long it takes to get there. Then they compare that measurement to the brand-name drug. While innovator companies submit full new drug applications, generic companies submit what are known as abbreviated new drug applications (ANDAs). Along with showing that a generic drug has the same bioavailability as the brand-name drug, generic companies must prove that their products have the same active ingredient, follow the same quality manufacturing standards, and have similar labeling. (See "FDA Requirements for Generic Drugs.")
The competition encouraged by the Hatch-Waxman Act helps to keep drug costs down and also spurs innovator firms to develop more new drugs, Buehler says. "The law aims to protect the intellectual property rights of innovator companies, while also encouraging the development of generic drugs," he says. As an incentive for generic drug firms to submit ANDAs to the FDA, the first generic challenger of patents is awarded a period of marketing exclusivity.
The FDA's generic drug rule, which went into effect on Aug. 18, 2003, seeks to close legal loopholes in the Hatch-Waxman Act that delay generic drug approval. For example, only one 30-month "stay" is allowed under the new regulation if an innovator company sues a generic company over patent issues. This may occur after a generic applicant certifies that an innovator's patent will not be infringed. Unless the innovator sues within 45 days after such notice, there is no 30-month stay. The innovator can still sue, but no 30-month stay results.
A stay is the term for the delay in generic approval that occurs when a brand-name company files a patent infringement lawsuit. This delay is meant to be a time to resolve issues about whether a generic drug company is infringing a drug patent. During the stay the FDA cannot approve the generic drug.
A limit of one 30-month stay is in line with recommendations from the Federal Trade Commission (FTC). According to an FTC study released July 30, 2002, there were cases involving several brand-name drugs between 1994 and 2000 in which repeated 30-month stays delayed access to generic drugs.
Access to generic drugs has sometimes been delayed from four to 44 months when drug companies have used various methods to get repeated 30-month stays. Examples of delaying tactics include submitting patent information on the color of the pill bottle, ingredient combinations, and other minor matters that don't affect the drug's effectiveness or safety.
Such strategies have been seen only in a minority of drug firms. And, according to PhRMA, stays are rare. But the FTC concluded that multiple stays can have substantial financial impact and are "harmful to consumers." When President Bush first announced the proposal for these regulations last year, he said, "Our message to brand-name manufacturers is clear: You deserve the fair rewards of your research and development; you do not have the right to keep generic drugs off the market for frivolous reasons."
The new regulation also implements another FTC recommendation to tighten the patent submission and listing process so that only appropriate patents are submitted to the FDA. To help prevent unfair competition, the final rule clarifies the types of patents that must be submitted to the FDA. Companies must submit patent information on active ingredients, drug formulations and compositions, and approved uses of a drug. Certain patents, such as those for packaging claims, are among those that cannot be submitted. More detailed information will now be required on patent submissions, and false statements could lead to criminal charges.
Kathleen Jaeger, GPhA president and chief executive officer, praised the announcement of the generic drug regulation and said it complements generic drug access provisions that were considered during the 108th Congress as part of the Medicare Prescription Drug and Modernization Act of 2003. These provisions, originally introduced as the Greater Access to Affordable Pharmaceuticals Act, amend the Hatch-Waxman Act.
"GPhA strongly believes that the administration's initiatives, coupled with substantial legislative measures in the compromise legislation, will ensure that American health care becomes more affordable," Jaeger said in a statement. The legislation, which also aims to eliminate practices that delay access to low-cost drugs, overlaps with the FDA's regulation in one area in that it would also prevent multiple 30-month stays in the approval of generic drugs.
In testimony before the Senate Judiciary Committee on June 17, 2003, Bruce N. Kuhlik, PhRMA's senior vice president and general counsel, cautioned against changes that could "undermine incentives for continued pharmaceutical innovation." He said, "The Hatch-Waxman Act of 1984 is achieving its purpose of speeding market entry of generic drugs."
Kuhlik pointed out that since the law was enacted, the generic share of the drug market has soared, and so has the expense of developing new drugs. "Our patent laws and regulations provide a key incentive for continued innovation in medicines," Kuhlik said. "Better treatments and new cures can come only from pharmaceutical research companies, and only if patent incentives are maintained."
In 2002, the FDA approved 321 generic drugs, up from 207 in 1995. Of those, 80 were first-time generics. The agency also issued 63 "tentative approvals" and 20 "approvables" of generic drugs. A tentative approval indicates that final approval of the application is delayed due to patent or exclusivity issues. Approvable applications are reviewed and ready for full approval pending a labeling issue, also typically dealing with legal matters.
It takes more than 20 months on average for a new generic drug to be approved by the FDA, and it usually involves multiple review cycles. Only about 7 percent of applications are approved on the first cycle and about a third are approved on the second cycle. Sometimes multiple review cycles can't be avoided, but the FDA has identified the lack of early communication between generic drug companies and the FDA as one cause for multiple review cycles. With the proposed increases for the generics budget, the FDA plans to increase resources that would make earlier communications possible.
The agency plans to hire 40 more experts to help speed up the review of generic drug applications so that review time can be reduced by at least two months. The goal is to provide guidance that improves the quality of applications the first time they are submitted, rather than going through multiple review cycles because of problems. "Each round of review means six months or more delay in approval," McClellan says.
The new resources, along with other improvements, are expected to reduce the total time to approval for most new generic drugs by three months or more over the next three to five years. One new approach will be to develop an FDA standard for giving generic companies initial feedback on obvious minor deficiencies within 10 days after the first review cycle is completed. Applicants will have an opportunity to respond and amend an application to try to avoid a whole new review cycle. The Office of Generic Drugs will issue guidance in 2004 on various policy changes related to earlier communication with drug companies.
"It won't be enough for FDA just to improve its review cycle time," McClellan adds. "Generic manufacturers must improve the quality of their initial applications. The FDA and generic manufacturers all need to try harder to get it right the first time around."
"Generic Drugs: Safe. Effective. FDA Approved." That's one of the slogans featured in an FDA consumer education program to promote consumer confidence in generic drugs. The FDA messages have been featured in newspaper articles, posters, and brochures highlighting the safety and effectiveness of generic drugs. Public service announcements have appeared in major magazines and journals. Posters and brochures are being distributed at major pharmacies throughout the country. Advertisements rolled around on buses in Chicago, Los Angeles, and New York, and have appeared on billboards in Michigan.
Consumers want lower-cost options for drugs, according to AARP, a nonprofit organization that addresses the needs of people ages 50 and older. In a recent AARP survey of 1,046 people ages 45 and up, 84 percent said generic drugs are important for controlling drug costs. Most also said they usually choose generics over brand names when generics are available. And 24 percent reported not being able to afford a prescription drug when no generic was available.
Richard Cole, senior vice president of corporate communications at Blue Cross Blue Shield of Michigan, says in a statewide survey he conducted in the summer of 2001, most people said they believe generic drugs are equivalent to brand-name drugs. "In the past, the conventional wisdom was that if we increased education about generic drugs, it would look like our only motives were to save money for the company," Cole says. "But consumers reported that they saw it as our job to tell them about generic drug options."
In the fall of 2001, Blue Cross Blue Shield invited all Michigan pharmacies to participate in a competition to increase generic dispensing rates. The goal was to increase generic use among Michigan Blues members by one percentage point, which would result in a $17 million savings for both the company and the customers, Cole says.
Blue Cross Blue Shield challenged pharmacies to develop in-store campaigns and tracked generic dispensing rates. More than 1,000 Michigan pharmacies competed. The prize for the stores with the highest rates: featured spots in a $1 million advertising campaign with the slogan "Generic Drugs--The Unadvertised Brand." Rite Aid won for the retail chain category and Grand Value Drugs of Detroit won for the independent pharmacy category. Cole estimates that the annual savings for Michigan Blues members was more than $30 million.
"People don't want a less expensive drug if they think the quality isn't good," Cole says. "When you or a member of your family gets sick, you don't want second best. But you don't have to worry about that with generic drugs."
The FDA's Center for Drug Evaluation and Research would like to hear from organizations interested in partnering with the FDA on its generic drug education program. For more information about a potential partnership, call (301) 827-7503.
Examples of recent first-time generic equivalent approvals for brand-name drugs:
(Infographic by Renée Gordon)
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