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Faster approval of generic drugs could cut high prescription costs

Op-ed: Slow approval of generic drugs contributes to high prescription costs.

High prescription drug prices make most Americans' blood boil, with the same drugs costing up to six times more here than in Western Europe, where drug prices are regulated. However, one cause of high prices has received scant attention: the delays in bringing generic drugs to the market.

This problem, costing consumers billions of dollars each year, should be a top priority for Dr. Robert M. Califf, who was just confirmed by the Senate as the new Commissioner of the Food and Drug Administration (FDA).

The FDA — which regulates up to 25 cents of every dollar spent by U.S. consumers — has a backlog of some 4,300 generic drugs awaiting approval. Each year that a copycat generic drug, whose prices are up to 85 percent less than a brand-name drug, does not make it to market imposes huge costs on patients. The pharmaceutical industry blames the FDA for an expensive, time-consuming application process, and the long-underfunded FDA says that companies often submit poor applications.

Acting FDA Commissioner Stephen Ostroff told Congress last fall that, without greater funding, "something is going to have give in some aspect of what we are doing." However, President Obama's budget request for the agency's drug evaluation and approval division is no higher than last year's.

Generics account for 88 percent of all prescriptions in the United States, but only 28 percent of the cost and about one-seventh of the revenues of the nearly $400 billion US pharmaceutical industry. In 2011, they saved consumers $193 billion a year, according to the Generic Pharmaceutical Association. The cost difference between generics and brand drugs has an outside impact on the elderly. An AARP study found that older patients who use three generic drugs on a chronic basis paid $849 in 2013, compared with more than $8,000 a year for three brand-name medications.

When patents end on drugs developed by pharmaceutical companies, which benefit enormously from this protection, generic-drug makers can produce virtually identical low-cost drugs. The same is true of biologics — expensive pharmaceuticals created in living cells rather than being chemically synthesized — whose generic version is known as "biosimilars." The price difference between on-brand biologics, used to treat diseases including cancer and hepatitis C, and biosimilars can be as much as 1,000 percent.

Many of the heroes and villains of this tale may wear the same hat as major pharmaceutical companies like Novartis, Pfizer and Mylan have become big players in the generics market, but the goal for consumers and American public health more broadly must be to bring affordable drug treatments to patients who need them. In a reality bounded by the exquisitely imperfect U.S. health-care system, what matters in the short term to patients needing a life-saving drug is not a complex policy fix but medications that don't force them to choose between destitution and hope for a cure or survival.

Exorbitant prices for on-brand drugs cost many consumers directly, but virtually every American who takes prescription medicines is hurt indirectly through the costs that insurance companies pay and pass on to individuals and employers through higher premiums and deductibles, and that are charged Medicaid, Medicare, and the Veterans Administration, and, hence, the taxpayer. Medicare explicitly urges consumers to seek generics to reduce costs.

The FDA has significantly increased its number of drug approvals in the last few years, thanks in part to a 2012 measure requiring drug makers to pay approval-processing fees that have enabled the agency to hire 1,000 additional staffers. Yet, the FDA acknowledges a four-year backlog. Sen. Susan Collins, a Maine Republican and chair of the Senate Special Committee on Aging, has held hearings on the issue, and the House Committee on Oversight and Government Reform has called for investigations. Hillary Clinton has promised, if elected, to fully fund the FDA's Office of Generics to enable the agency to more quickly approve lower-cost, off-brand drugs.

Getting generics on the market more quickly only addresses a small piece of America's health-care cost problems. However, doing so would benefit millions of consumers. Commissioner Califf should make it a priority to reduce the backlog. And, to do so requires more money. The Alliance for a Stronger FDA (strengthenfda.org) — which includes consumer, patient, research and health-professional organizations — has called for an additional $120 million above the president's $2.7 billion request. Protecting 325 million Americans' food, drugs, and medical devices should be worth more than the measly $8 per American per year that is appropriated for all FDA activities.

Andrew L. Yarrow is a public-policy professional and author of several books who writes frequently on social, political, cultural, and economic issues. His email is andrew.l.yarrow@gmail.com.

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