You might think that lower cost means lower quality, but that's not the case with prescription drugs, says Gary Buehler, R.Ph., director of the Food and Drug Administration's Office of Generic Drugs. "The FDA ensures a rigorous review of all drugs, and consumers can be assured that generic drugs are as safe and effective as brand-name drug products," he says.
Generic drugs are copies of brand-name drugs and are available in both over-the-counter (OTC) and prescription form. For example, ibuprofen is the generic version of the OTC pain medicine Advil. Last year, the FDA approved the first generic of the prescription anti-seizure drug Neurontin (gabapentin). Generics have the same quality, safety, and strength as branded medicines. But for an average brand-name drug that costs $72, the generic version costs about $17.
At roughly one-third the price of brand-name medications, generics can bring consumers significant savings. A 2002 study by the Schneider Institute for Health Policy at Brandeis University in Waltham, Mass., concluded that if Medicare increased the rate of generic usage to that of similar high-performing private sector plans, its 40 million beneficiaries could see potential savings of $14 billion in 2003.
The FDA has made it a priority to encourage the availability of generic drugs. FDA experts say there is no question that brand-name drugs are also essential.
"Generic drugs are possible only as a result of the development of new innovative drugs, and this innovation requires significant investment," says former FDA Commissioner Mark B. McClellan, M.D., Ph.D. "Without fair compensation from meaningful patent protection, drug research and development would slow or stop." According to the Boston-based Tufts Center for the Study of Drug Development, the cost to develop a new drug averages $897 million. The Pharmaceutical Research and Manufacturers of America (PhRMA) reports that its member companies invested about $32 billion in 2002 in discovering and developing new medicines.
A brand-name company submits information to the FDA on patents it holds on a drug and their expiration dates. Then the agency lists patents on new drugs in the publication Approved Drug Products with Therapeutic Equivalence, also known as the Orange Book. Patent protection gives brand-name companies, also known as "innovator" companies, the sole right to sell a drug for a certain period of time. This allows them to fairly recoup their investment costs. Patent protection for drugs typically lasts an average of 11 years. A generic drug can only enter the market after the brand-name patent or other marketing exclusivities have expired and FDA approval is granted.
But rising drug costs remain a major challenge for consumers, especially older Americans. "This is where generics play an essential role," McClellan says. "Once the appropriate patent protection has expired, generic medicines give patients an alternative."
On Dec. 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 was enacted. Title XI of that Act provides for, among other things, limits on certain court actions that could delay availability of generic drugs. The move is expected to save consumers billions of dollars, as well as lower costs for government and employer-provided coverage.
In addition, the FDA also continues initiatives to improve access to generic drugs. These initiatives involve revamping the FDA's review process to put generic drugs into consumers' hands more quickly. The fiscal year 2005 FDA budget request includes increases in funding for the FDA's generic drug program. The additional funds would go toward increased staff and other improvements to speed up generic drug reviews. The FDA routinely evaluates the generic drug review program to find ways to increase efficiency and get quality products into the hands of consumers to improve the public health.
The main reason generic drug companies can market their drugs at lower prices is that they don't face the same development costs as brand-name companies. Under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, generic drug companies don't have to repeat expensive clinical trials.
"The Hatch-Waxman Act essentially created the generic drug industry," says Buehler. Roughly two decades ago, generics made up only 12 percent of all prescriptions. Now, generics represent over 50 percent of all prescriptions in the United States, according to the Generic Pharmaceutical Association (GPhA). "The law paved the way for many more generic drugs because rather than repeating research, generic drug companies instead must show the FDA that their drugs are bioequivalent to the brand-name drug," Buehler says.
When a drug is "bioequivalent" to another, it means that its active ingredient works in the same way and in the same amount of time as the brand-name drug. Scientists measure a generic drug's bioavailability--the amount of the generic drug in the bloodstream and how long it takes to get there. Then they compare that measurement to the brand-name drug. While innovator companies submit full new drug applications, generic companies submit what are known as abbreviated new drug applications (ANDAs). Along with showing that a generic drug has the same bioavailability as the brand-name drug, generic companies must prove that their products have the same active ingredient, follow the same quality manufacturing standards, and have similar labeling. (See "FDA Requirements for Generic Drugs.")
The competition encouraged by the Hatch-Waxman Act helps to keep drug costs down and also spurs innovator firms to develop more new drugs, Buehler says. "The law aims to protect the intellectual property rights of innovator companies, while also encouraging the development of generic drugs," he says. As an incentive for generic drug firms to submit ANDAs to the FDA, the first generic challenger of patents is awarded a period of marketing exclusivity.
The Medicare Modernization Act will close legal loopholes in the Hatch-Waxman Act that delay generic drug approval. For example, only one 30-month "stay" is allowed under the Act if an innovator company sues a generic company over patent issues. This may occur after a generic applicant certifies that an innovator's patent will not be infringed. Unless the innovator sues within 45 days after such notice, there is no 30-month stay. The innovator can still sue, but no 30-month stay results.
A stay is the term for the delay in generic approval that occurs when a brand-name company files a patent infringement lawsuit. This delay is meant to be a time to resolve issues about whether a generic drug company is infringing a drug patent. During the stay the FDA cannot approve the generic drug.
A limit of one 30-month stay is in line with recommendations from the Federal Trade Commission (FTC). According to an FTC study released July 30, 2002, there were cases involving several brand-name drugs between 1994 and 2000 in which repeated 30-month stays delayed access to generic drugs.
Access to generic drugs has sometimes been delayed from four to 44 months when drug companies have used various methods to get repeated 30-month stays. Examples of delaying tactics include submitting patent information on the color of the pill bottle, ingredient combinations, and other minor matters that don't affect the drug's effectiveness or safety.
Such strategies have been seen only in a minority of drug firms. And, according to PhRMA, stays are rare. But the FTC concluded that multiple stays can have substantial financial impact and are "harmful to consumers." President Bush has said, "Our message to brand-name manufacturers is clear: You deserve the fair rewards of your research and development; you do not have the right to keep generic drugs off the market for frivolous reasons."
A new regulation that went into effect Aug. 18, 2003, implements another FTC recommendation, to tighten the patent submission and listing process so that only appropriate patents are submitted to the FDA. To help prevent unfair competition, the regulation clarifies the types of patents that must be submitted to the FDA. Companies must submit patent information on active ingredients, drug formulations and compositions, and approved uses of a drug. Certain patents, such as those for packaging claims, are among those that cannot be submitted. More detailed information will now be required on patent submissions, and false statements could lead to criminal charges.
Kathleen Jaeger, GPhA president and chief executive officer, praised the announcement of the generic drug regulation and said it complements generic drug access provisions of the Medicare Modernization Act.
"GPhA strongly believes that the administration's initiatives, coupled with substantial legislative measures in the compromise legislation, will ensure that American health care becomes more affordable," Jaeger said in a statement. The legislation overlaps with the FDA's regulation in one area in that it would also prevent multiple 30-month stays in the approval of generic drugs.
In testimony before the Senate Judiciary Committee on June 17, 2003, Bruce N. Kuhlik, PhRMA's senior vice president and general counsel, cautioned against changes that could "undermine incentives for continued pharmaceutical innovation." He said, "The Hatch-Waxman Act of 1984 is achieving its purpose of speeding market entry of generic drugs."
Kuhlik pointed out that since the law was enacted, the generic share of the drug market has soared, and so has the expense of developing new drugs. "Our patent laws and regulations provide a key incentive for continued innovation in medicines," Kuhlik said. "Better treatments and new cures can come only from pharmaceutical research companies, and only if patent incentives are maintained."
In 2003, the FDA approved 263 generic drugs. The agency also issued 101 tentative approvals of generic drugs. A tentative approval indicates that final approval of the application is delayed due to patent or exclusivity issues. In 2003, 479 applications were submitted for review. This is up from 392 the year before.
It takes 20 months on average for a new generic drug to be approved by the FDA, and it usually involves multiple review cycles. Very few applications are approved on the first cycle, but about a third are approved on the second cycle. Sometimes multiple review cycles can't be avoided, but the FDA has identified the lack of early communication between generic drug companies and the FDA as one cause for multiple review cycles. With the proposed increases for the generics budget, the FDA plans to increase resources that would make earlier communications possible.
The agency plans to hire more review experts to help speed up the review of generic drug applications so that review time can be reduced by at least two months. The goal is to provide guidance to industry to allow for submission of more complete of applications the first time they are submitted, rather than going through multiple review cycles because of problems. Each round of review generally means many months delay in approval.
The new resources, along with other improvements, such as adding another chemistry review division, are expected to reduce the total time to approval for most new generic drugs by three months or more over the next three to five years. One new approach will be to develop an FDA standard for giving generic companies initial feedback on obvious minor deficiencies within 10 days after the first review cycle is completed. Applicants will have an opportunity to respond and amend an application to try to avoid a whole new review cycle.
"Generic Drugs: Safe. Effective. FDA Approved." That's one of the slogans featured in an FDA consumer education program to promote consumer confidence in generic drugs. The FDA messages have been featured in newspaper articles, posters, and brochures highlighting the safety and effectiveness of generic drugs. Public service announcements have appeared in major magazines and journals, as well as on the radio. Posters and brochures are being distributed at major pharmacies throughout the country. Advertisements rolled around on buses in Chicago, Los Angeles, and New York, and have appeared on billboards in Michigan.
Consumers want lower-cost options for drugs, according to AARP, a nonprofit organization that addresses the needs of people ages 50 and older. In a recent AARP survey of 1,046 people ages 45 and up, 84 percent said generic drugs are important for controlling drug costs. Most also said they usually choose generics over brand names when generics are available. And 24 percent reported not being able to afford a prescription drug when no generic was available.
Richard Cole, senior vice president of corporate communications at Blue Cross Blue Shield of Michigan, says in a statewide survey he conducted in the summer of 2001, most people said they believe generic drugs are equivalent to brand-name drugs. "In the past, the conventional wisdom was that if we increased education about generic drugs, it would look like our only motives were to save money for the company," Cole says. "But consumers reported that they saw it as our job to tell them about generic drug options."
In the fall of 2001, Blue Cross Blue Shield invited all Michigan pharmacies to participate in a competition to increase generic dispensing rates. The goal was to increase generic use among Michigan Blues members by one percentage point, which would result in a $17 million savings for both the company and the customers, Cole says.
Blue Cross Blue Shield challenged pharmacies to develop in-store campaigns and tracked generic dispensing rates. More than 1,000 Michigan pharmacies competed. The prize for the stores with the highest rates: featured spots in a $1 million advertising campaign with the slogan "Generic Drugs--The Unadvertised Brand." Rite Aid won for the retail chain category and Grand Value Drugs of Detroit won for the independent pharmacy category. Cole estimates that the annual savings for Michigan Blues members was more than $30 million.
"People don't want a less expensive drug if they think the quality isn't good," Cole says. "When you or a member of your family gets sick, you don't want second best. But you don't have to worry about that with generic drugs."
The FDA's Center for Drug Evaluation and Research would like to hear from organizations interested in partnering with the FDA on its generic drug education program. For more information about a potential partnership, call (301) 827-7503.