At hearing on oversight of generic drug user fee program, says “these slower approval times mean less competition and higher costs for consumers”
Posted on January 28, 2016
WASHINGTON, D.C., Jan. 28 – The chairman of the Senate health committee today said that despite the Food and Drug Administration (FDA) receiving an extra $1 billion in fees from the generic drug user fee program, the agency has slowed down its pace of approving generic drugs – threatening the program’s ability to increase competition and lower the price of drugs for patients.
“What matters to the American people are generic drug approval times and the number of approvals,” Chairman Lamar Alexander (R-Tenn.) said, “which to them mean increased market competition, a reduction in drug shortages, and more, lower-cost drugs available for patients.”
Alexander noted that the original goal of the generic drug program – as established in the 1984 Hatch-Waxman amendments – was to approve generic drugs in 180 days.
“But, the troubling news is that it is taking longer for the FDA to get drugs through the approval process, and according to a survey of generic drug makers, the median approval times have slowed from 30 to 48 months,” Alexander said. “According to one estimate, once there are six or more generic competitors, a drug costs about 10 percent of the brand price—so, these slower approval times mean less competition and higher costs for consumers.”
“To best restrain the growth of drug prices, we must encourage investment in life-saving therapies, avoid unnecessary regulatory burdens that slow down development and drive up costs, and ensure the marketplace remains competitive,” Alexander said, noting that – through its innovation agenda – the committee has been working in a bipartisan way for the past year to reduce unnecessary regulatory burden to bring safe drugs and medical devices to patients more quickly.
He continued, “At the same time, Sens. Collins and McCaskill, leaders of the Aging Committee, have been examining what improvements may be necessary to ensure that the FDA expedites applications for generic drugs to keep the marketplace competitive, which will help keep drug prices down, and I look forward to working with them on that effort.”
Alexander said today’s oversight hearing of the 2012 Generic Drug User Fee Amendments – the first since they were enacted to help improve the review process for generic drugs – comes at a “critical time for patients,” as the amendments are set to be reauthorized next year.
The chairman’s full prepared remarks are below:
In December, the president signed into law the Every Student Succeeds Act, a bill to fix No Child Left Behind and proof that this committee can work together to tackle very difficult issues.
But a law not properly implemented isn’t worth the paper it’s written on, which is why I’m going to be working with Senator Murray to set up a strong oversight process during 2016 to make sure the teachers, governors, chief state school officers, parents and students who counted on us to fix that law see that it’s implemented properly.
We’re here today for a similar purpose: to conduct oversight of the 2012 Food and Drug Administration (FDA) Safety and Innovation Act – specifically the law’s Generic Drug User Fee Amendments, which are fees negotiated between the FDA and generic drug makers to give the agency additional resources intended to speed the review of generic drugs.
This is Congress’ first oversight hearing since these agreements were passed in 2012, and it comes at a critical time for patients:
Despite the FDA receiving nearly $1 billion in user fees since 2012 as a result of these user fee agreements, performance is not living up to Congress’ or patients’ expectations, as the number of generic drugs approved per year remains about the same.
The user fee agreements are due to be reauthorized next year, and discussions between the FDA and industry are already underway—making now the appropriate time for us to better understand whether or not these 2012 agreements are working to give Americans better access to generic drugs.
The generic drug program, established by the Hatch-Waxman Amendments over 30 years ago, has had great success increasing competition and lowering drug prices.
The program was created to make it easier for generic drugs to enter the market.
Let me quickly explain how this works: Once a drug is approved by the FDA, for example, Lipitor – which is widely used to help lower cholesterol – no other manufacturer can make that drug for a period of time. When that period of time expires, a manufacturer may make a copy of that drug – and we call that a generic drug.
That generic copy must also have FDA approval.
This generic approval process doesn’t include full clinical trials, which often are long and expensive, contributing to higher prices for brand drugs.
As a result, more generic drugs in the market creates competition and lowers prices for consumers.
And today, 88 percent of prescription drugs purchased in the United States are generic drugs.
However, in 2012, 26 years after the law first passed, it became clear the generic drug approval program needed an overhaul.
More generic drugs were coming from overseas. Generic drug companies in China and India were inspected much less frequently than American companies, putting American companies at a disadvantage and, more importantly, putting patients at risk.
There was a backlog of 4,700 applications waiting to be reviewed, and the median approval time to get review of a generic drug was 30 months, far surpassing the 180-day timeframe for review as laid out in the Hatch-Waxman amendments in 1984.
Additionally, in 2012, many generic sterile injectable drugs were in shortage, causing doctors and hospitals to scramble to ensure patients were getting the best treatment possible.
To address these problems, Congress passed the first Generic Drug User Fee Amendments (often referred to by its acronym GDUFA or as congressional staff and industry insiders call it – “Ga-DOO-Fa”) as part of the FDA Safety and Innovation Act.
This built on the success of similar agreements that Congress had previously passed between drug and device manufacturers and their regulators in the FDA.
This user fee agreement was the first agreement between the generic industry and the FDA on how to improve the review process for generic drugs.
With the enactment of these amendments, Congress anticipated:
One: that generic drug facilities abroad would be brought up to the same standards as facilities in the United States; and
Two: that American patients would benefit from faster approval of generic drugs.
These two actions would bring more competition to the market and lower the price of drugs for consumers.
But there are concerns about the implementation of this program.
Some progress has been made on the backlog of applications for generic drugs—some progress, but certainly not enough.
In 2012 there was a backlog of 4,700 pending applications and that has now dropped to just over 3,500 applications pending approval, according to the Generic Pharmaceutical Association.
The HHS Inspector General has reported that the FDA is improving its inspections abroad, one of the important goals of the user fee agreements.
But, the troubling news is that it is taking longer for the FDA to get drugs through the approval process, and according to a survey of generic drug makers, the median approval times have slowed from 30 to 48 months.
According to one estimate, once there are six or more generic competitors, a drug costs about 10 percent of the brand price—so, these slower approval times mean less competition and higher costs for consumers.
This slowdown in approval time is despite the fact that the FDA has received nearly $1 billion in user fees since this law was passed – that’s funding that is on top of the money that Congress annually provides to the FDA through the appropriations bill.
That’s about $300 million a year, or 20 percent of the total amount that the FDA spent researching, inspecting, and reviewing all drugs – generic and brand name alike – in fiscal year 2015.
I understand that the FDA has met most of the goals laid out in the agreement for industry user fees for regulatory actions, hiring staff, and increasing inspections.
But I look forward to hearing whether these metrics are the most appropriate, given I continue to hear that generic drug approval is too slow from manufacturers and patients.
While industry provides funding according to the agreement, the American taxpayer, through the Congressional appropriations process, provided over 40 percent for the generic drug review program in fiscal year 2014, according to the FDA’s financial report.
But the data points that matter to American people are generic drug approval times and the number of approvals, which to them mean increased market competition, a reduction in drug shortages, and more, lower-cost drugs available for patients.
Another issue we’re hearing a lot about is drug pricing – and here are some points to consider:
One: While the cost of drugs is a legitimate concern for many Americans – it’s part of an even larger problem of rising health care costs.
Just this week, the Congressional Budget Office (CBO) announced in its annual “Budget and Economic Outlook” that for the first time, federal spending for the major health care programs (Medicare, Medicaid, SCHIP, Obamacare) represents the largest fraction—more than 60 percent—of the projected growth in mandatory spending in 2016. CBO notes that this spending is partially driven by the increase in per capita health care costs.
Two: While we work to lower the cost of drugs, we need to invest in and incentivize the development of life-saving therapies.
Congress last year added $2 billion in the appropriations process, bringing NIH’s total budget in FY2016 up to around $32 billion – but this is still less than what’s spent in the private sector.
Members of the Pharmaceutical Manufacturers of America, who only represent a portion of the market, spent over $50 billion in FY2014 alone coming up with new cures and treatments.
The clinical trials required to prove that medicine is safe cost hundreds of millions of dollars, even for the ninety percent of drugs that fail. In addition, the regulatory approval process is lengthy, which also adds costs.
As a result of this effort, biotech and drug companies big and small have done remarkable things to help patients with diseases like HIV, Cystic Fibrosis, and cancer live longer, healthier lives—a critical development we do not want to interrupt.
Third: To best restrain the growth of drug prices we must encourage investment in life-saving therapies, avoid unnecessary regulatory burdens that slow down development and drive up costs, and ensure the marketplace remains competitive.
For the past year, this committee – in a bipartisan way –has been looking at ways to reduce unnecessary regulatory burden so we can get safe, innovative, life-saving therapies into patients’ medicine cabinets more quickly.
At the same time, Sens. Collins and McCaskill, leaders of the Aging Committee, have been examining what improvements may be necessary to ensure that the FDA expedites applications for generic drugs to keep the marketplace competitive, which will help keep drug prices down, and I look forward to working with them on that effort.
The generic drug industry really is a remarkable story. Over the last 30 years – generic drugs have gone from a small fraction of the marketplace to 88 percent. It’s hard to imagine what the prescription drug market would look like today without generic drugs.
I look forward to hearing from our witness today to learn more about where Congress can help make improvements to the regulatory process and ensure that the FDA has the tools it needs to create a generic drug review system that functions as Congress intended and as American patients and taxpayers deserve.
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For access to this release and the senator’s other statements, click here.