New Study Finds Programs Designed to Protect Safety Being Widely Abused, Delaying Generic Choices for Consumers and Costing U.S. Health System Billions

Published Online: Wednesday, July 23, 2014
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PRESS RELEASE

WASHINGTON, DC (July 23, 2014) — The ongoing abuse of FDA drug safety programs to prevent generic competition is costing the American health care system and patients $5.4 billion in annual pharmaceutical spending that could be saved if 40 drugs examined in a Matrix Global Advisors report released today were allowed to come to market. The study, commissioned by the Generic Pharmaceutical Association, also found that after biosimilars enter the market, misuse of Risk Evaluation and Mitigation Strategies (REMS) and other restricted access programs would result in approximately $140 million in lost savings for every $1 billion in biologics sales.

“For patients waiting for generic alternatives to expensive brand medicines, every day counts. For lawmakers struggling to balance the budget, every dollar matters,” said Ralph G. Neas, President and CEO of the Generic Pharmaceutical Association (GPhA). “This study shows that by using safety programs as a smokescreen for anti-competitive practices, some brand companies are delaying generic choices for patients and driving up drug costs.

Further, allowing these kinds of abuses to continue unabated threatens the cost savings potential around the next frontier of innovation: biosimilars. The data reveals that allowing these practices to go unchecked will have exorbitant and spiraling costs. These critical medicines have increasingly become the standard of care for many serious conditions, accounting for $92 billion of U.S. drug spending in 2013. This could mean tens of billions more in lost savings in the future.”

The study, titled Lost Prescription Drug Savings from Use of REMS Programs to Delay Generic Market Entry, examines the practice of abusing REMS and “Restricted Access Drug” programs to deny generic drug firms access to samples of brand drug products. Without access to these samples, which traditionally have been purchased by generic drug applicants through wholesalers, manufacturers cannot conduct appropriate testing and secure subsequent approval of generic medicines. Refusing access to samples effectively delays generic alternatives for patients, and extends brand product monopolies. The study was based on 40 products identified in a confidential survey of eight generic manufacturers and conducted from December 2013 to March 2014.

“This report is the first clear picture of the costs imposed by misuse of REMS and other restricted access programs,” said Alex Brill, CEO of Matrix Global Advisors. “By finding ways to obstruct the generic approval process, brand companies protect their market share and keep generics off the market. Our research also reveals that the practice clearly extends beyond traditional REMS programs. In more than 20 cases, manufacturers reported brand companies using non-REMS restrictions to block access.”

The key findings of the study include:
  • REMS programs are widespread.
    • FDA requires REMS programs for almost 40 percent of new drug approvals, according to briefs presented in litigation on this issue.
  • Brand manufacturers have also begun imposing distribution restrictions on non-REMS products.
    • Manufacturers report that brand drug companies have used non-REMS restrictions to block access to more than 20 products.
  • These abuses cost the government, patients, and the health system billions of dollars.
    • Annually, $5.4 billion in savings is lost from 40 generic small-molecule products whose market entry is currently delayed as a result of misuse of REMS and other restricted access programs.
    • The federal government bears a third of this burden, or $1.8 billion.
    • Private insurance companies lose $2.4 billion.
    • Consumers pay $960 million in extra out-of-pocket costs.
    • State and local governments, and other small payors, lose savings of $240 million.
  • If it continues, this issue also can be expected to have a major negative impact on savings from biosimilars once the FDA provides final guidance for biosimilars.
    • Delaying biosimilar entry by restricting access to samples would result in approximately $140 million in lost savings for every $1 billion in biologics sales.

Read the full report:
Lost Prescription Drug Savings from Use of REMS Programs to Delay Generic Market Entry , Matrix Global Advisors, July 2014.
Key findings and issue overview

References:
New England Journal of Medicine on REMS
New York Times on REMS
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