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FDA Generic Drug Program Shows Progress Toward Lowering Costs

Nov. 18, 2021 — At least one generic drug approval – and ideally more than one – is needed to spur competition and reduce the overall cost to consumers taking a particular medication. This is particularly true when a drug is difficult to make or has the potential to only treat a small number of patients.

Sometimes pharmaceutical companies need an incentive to develop and market such a generic alternative.

With that in mind, Congress passed the Competitive Generic Therapy (CGT) initiative in 2017, which provides an exclusive 180 days for any company first to get FDA authorization and offer consumers a generic formulation.

A new study from FDA researchers reveals that about 10% of almost 3,000 generic approvals between 2017 and 2020 took advantage of the new initiative. The reportwas published Nov. in JAMA.

“Based on the evidence so far, we believe the CGT pathway is successfully incentivizing the timely marketing of drugs,” lead study author Harinder Singh Chahal, PharmD, says.

To keep exclusive rights, a company has to market their generic within 75 days of FDA approval. A second provision allows the agency to approve other applications in the meantime and until the first company starts marketing.

“We were not surprised that these features of CGT exclusivity worked as intended, but we were surprised by how quickly many companies commenced marketing after approval,” added Chahal, who is affiliated with the FDA Office of Public Health Strategy and Analysis

Half of the drugs approved with exclusive rights reached patients with 3 days and 75% reached market within 10 days, Chahal says.

More Generics, More Savings

Chahal and colleagues noted in the study that prices drop about 30% when one generic option becomes available.

Asked what happens when even more generics gain approval, Chahal said, “Our colleagues found that, based on invoice prices alone, with two generics the price reductions relative to a brand drug could be around 46%, with three generics the relative reduction could reach about 56% and so forth.”

The greatest price reductions, 90% or more, tend to occur with six or more generics on the market, he added. More information is available in a December 2019 FDA report: “Generic Competition and Drug Prices: New Evidence Linking Greater Generic Competition and Lower Generic Drug Prices.”

Price Comparison Lacking

The study is “a useful description of how this new program has been functioning in its first years, reporting how many applications were filed, what their approval status has been so far, etc.,” Karen Van Nuys, PhD, executive director of the Value of Life Sciences Innovation Project Says.

The proof-of-concept research shows the program is functioning, akin to “demonstrating that the plumbing in a new house works – the pipes seem to be connected and applications can flow through from start to finish,” added Van Nuys, who is also a research assistant professor at the USC Price School of Public Policy and co-author of an October 2021 study revealing the price of some common generic drugs was higher when purchased through Medicare versus at Costco.

The study would have been “even more useful if it had provided more context to assess whether the program is working well or achieving its goals,” Van Nuys said. For example, data on resulting prices after generics are approved through CGT would have been very useful information, she added.

“To be fair, the authors do list the lack of price analysis as a limitation of the study.”

“I think of that as the bottom line by which this program should be evaluated,” Van Nuys said. “Do we get more drugs at lower prices with the CGT program that without? We don’t really know.”

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