Efforts to Boost Generic Competition are Bearing Fruit

The U.S. Food and Drug Administration (FDA) has a backlog of nearly 4,000 generic drug applications – each of which currently requires more than two years to approve. Over the past few years the FDA typically approved between 400 and 500 generic drugs a year. Under pressure from Congress, the agency hired 1,000 new employees and managed to approve (or tentatively approve) 99 drugs in December alone.  That is more than in any other single month.  The FDA has taken a lot of heat for the backlog. But the reality is actually more positive than many people realize. The primary reason for the backlog is competition; generic drug makers have filed an average of more than 1,000 abbreviated new drug applications (ANDAs) a year for the past four years. That is about one-third more than what the FDA expected. That is good news: Research finds that the average price of a generic drug relative to its brand prior to generic competition is inversely correlated to the number of competing firms producing a generic version. Basically, the more the merrier!

A new bill in Congress would take on another obstacle to generic drug competition. The Creating and Restoring Equal Access to Equivalent Samples Act is a bill to force drug makers to provide samples of branded medications to generic drug makers. Generic drug makers need samples in order to prove their products are essentially the same as the original brand drug.  In recent years, a few drug makers have turned to very narrow distribution channels for their drugs. This allows them more control over their products (including thwarting generic substitution that may exist) but also allows them to more easily refuse to provide samples to would-be competitors.

If you think about it, medicine may be one of the only industries where products are so highly regulated that competitors can be barred from evaluating copies of a product. That’s troubling in and of itself.

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  1. Ron Greiner says:

    Basically, the more the merrier!

    Competition is critical in free and open markets.

    Friday Newsflash: Lee just emailed me: Lee says, “Another one bites the dust . Aetna has yet to file rates in Nebraska. I like how they say may be available…”

    –Individuals and families

    As you may know, in 2013, Coventry Health Care and its affiliates joined the Aetna family of companies. As a result, Coventry will no longer offer individual health products in the state of Nebraska effective January 1, 2017, but health plans will be available from Aetna Health Inc.

    Members existing coverage will continue until their policy period ends on December 31, 2016. They will not be able to renew their current plan when their policy term ends. This applies to both on and off exchange plans in Nebraska.–

    This June United Healthcare, the Nation’s largest health insurer, terminated their Individual Medical (IM) division and now Coventry is gone.

    If you like your insurance company you can keep your insurance company — President Obama – the Monopoly Maker