A common belief among American consumers is that generic drugs are a safe and cost effective alternative to brand named drugs. That’s true except when it’s not.
When Congress passed the Drug Price Competition and Patent Term Restoration Act in 1984, commonly known as the Hatch-Waxman Act, the Food and Drug Administration (FDA) called it one of the most successful pieces of legislation ever passed. By increasing the number of generic drugs in the marketplace, the logic went, it would make drugs less expensive. The actual results have been more mixed.
Though generics have at times provided a cheaper alternative to brand name pharmaceuticals, the complete story is more complicated. Increasing amounts of fraud, arbitrary price hikes, attacks on intellectual property and, worst of all, serious health risks to consumers from drugs manufactured abroad are all cause to re-examine the role they play in our pharmaceutical supply chain.
Despite often receiving the benefit of the doubt, generic manufacturers’ business practices aren’t always above reproach. Some generic companies have become known for defrauding taxpayers by underpaying Medicaid rebates, taking exorbitant price increases and colluding to artificially set higher prices and fraudulently boost profits, among others.
An ongoing investigation launched by 47 state attorneys general alleges that 16 generic drug companies have colluded and conspired to artificially fix and manipulate prices on 300 individual drugs, including treatments for diabetes, cancer, arthritis and others. The result? From 2013 to 2014, a bottle doxycycline ballooned 8,281 percent from $20 to $1,800. Albuterol, an asthma drug sold by Mylan and Sun Pharmaceuticals, increased over 3,400 percent. Connecticut Attorney General William Tong, a Democrat and the principal prosecutor in this case, said that this illegal scheme is costing taxpayers billions of dollars and is a primary reason why health care and prescription drugs are unaffordable.
One of the less scrupulous ways generics seek to enter into the market is by using abbreviated patent challenges to invalidate the intellectual property (IP) protections of the inventors of new drugs. This IP, and the short-term market exclusivity it affords, is crucial to supporting the tens of billions of dollars spent annually on critical research, development and approval of new life-saving medicines and treatments. Competition once this period of exclusivity has expired should be encouraged, but IP protections are important to encouraging innovation and violations of it do not serve consumers well.
Even without these patent challenges, the FDA is already providing generic drugs with unprecedented market access by clearing the Abbreviated New Drug Approval (ANDA) backlog. Over the past two years, the FDA has approved more than 1,600 new generic drug applications, about a third more than it did under President Obama’s last two years in office. But, 43 percent – more than 700 – of those approved generics have not made it to market.
Former FDA Commissioner Scott Gottlieb has stated that the actions of the generic drug companies are a real problem because they are not bringing the expected competition to help consumers. Generic companies are securing approval from the FDA for new medicines but not developing them, nearly half the time depriving patients and taxpayers the fruits of the FDA’s efforts to clear this ANDA backlog.
Perhaps most disturbing is the health risk some generic drugs impose by using ingredients made in overseas drug factories noted for widespread irregularities. The U.S. National Bureau of Economic Research has found significant quality problems of ingredients produced in India and China, two of the most common places to manufacture drugs overseas.
An NBC news story from May of this year reported that Valsartan, a generic blood pressure medication with active ingredients made in two problematic facilities overseas, contained a chemical with the potential to cause cancer. Further discovery revealed that the drug contained a contaminant used to make rocket fuel. Corrupted drugs make it to American pharmacies because overseas FDA inspectors can’t keep up with foreign drug makers who veil irregular practices or problems in their ingredient production. The generic drug industry, which supplies 85 percent of the pharmaceuticals in United States, needs greater oversight to ensure the quality and efficacy of the drugs they sell to Americans, especially when they are manufactured overseas.
There is no doubt that generic drugs will play a role in American drug markets for the foreseeable future, but their track record is mixed. More attention must be paid to schemes that misclassify drugs for profits and undermine the patents of inventors. Greater transparency, increased accountability and more rigorous reporting are a necessity to ensure greater safety of drugs produced abroad. The Trump administration, Congress and state lawmakers should think twice before empowering generics based solely on a promise of lower prices. Without checks and balances, our physical and fiscal health remain at risk. Buyer beware!
• Gary D. Alexander served as Health and Human Services secretary in Rhode Island and Human Services secretary for the Commonwealth of Pennsylvania .