Healthy Competition

Why healthcare needs a competitive generic drug marketplace

By Curtis Rooney

JHC_Aug15_HSCARecent and ongoing critical prescription drug shortages and price spikes in the generic market are threatening the ability of physicians, hospitals and other healthcare providers to effectively care for patients. The Healthcare Supply Chain Association (HSCA) has looked at this public health crisis and believes that part of the path forward is greater competition in the generic drug market through sensible action by Congress and the U.S. Food and Drug Administration (FDA).

FDA’s primary mission is to protect public health by ensuring the safety and efficacy of drugs (and other products). In this respect, the FDA has no doubt worked tirelessly to achieve its mandate. Inspectors have repeatedly identified the root causes of drug shortages as problems related to manufacturing and quality control systems. Their findings include discoveries of mold, glass and/or other impurities related to the manufacturing process. This is clearly unacceptable.

In response, FDA then issues warning letters that give notice to plant operators. Inevitably, legal counsel is called and management may be advised to take the plant off-line. Once the plant is off-line, the number of suppliers decreases, the market contracts, demand increases and competitors either take market share or are unable to ramp up production in time to respond to the changing circumstances. The result is consolidation, potential hoarding, price increases and reduction in supply over time with only a slim hope of returning in a timely fashion to the market after further FDA clearance.

We believe that competition among pharmaceutical products leads to lower prices and, in many circumstances, encourages additional innovation. On the other hand, misaligned or inadequate incentives may deny the marketplace treatments that patients need. A balance between competition and innovation must be struck. Attention should be paid to the FDA’s impact on competition.

Potential solutions
Fortunately, there are a number of steps lawmakers and the FDA can take to facilitate competition in the pharmaceutical industry, including:

  • A more vigorous effort in support of so-called “biosimilar” drugs, including appropriate rules related to naming and labeling.
  • Faster review times for abbreviated new drug applications (ANDAs), especially when there are price spikes or drugs in shortage.
  • Providing FDA with adequate resources to ensure that expedited approvals for certain novel drug applications do not impede the approval of competing brand drug applications.
  • Legislation to prohibit misuse of Risk Evaluation and Mitigation Strategies (REMS).
  • Legislation that would narrow the definition of “dormant therapies” and impose appropriate and reasonable time limits on exclusivity of generic drugs.

What the pharmaceutical market should now be concerned about is that both the public and lawmakers are increasingly alarmed by critical shortages and generic price spikes. In response to soaring prices of certain widely prescribed generic drugs, Congress may be close to stepping in. Following Congressional hearings held by Sen. Bernie Sanders (I-Vt.) and Rep. Elijah E. Cummings (D-Md.), the HHS Office of Inspector General (OIG) has begun an investigation into the impact of generic price increases on the Medicare rebate program.

In addition, by a note of 30-21, the House Appropriations Committee passed a Labor-HHS-Ed appropriations bill that included an amendment by Rep. Marcy Kaptur (D-Ohio) directing HHS and the VA to provide a report on prescription drug costs for Medicare, Medicaid, and the Department of Veterans Affairs. The bill directs HHS to review and report on steps taken to competitively reduce prescription drug costs since 2001. The amendment was adopted on a voice vote.

More recently, the Campaign for the Sustainable Rx Pricing sponsored a poll conducted by Morning Consult. The polling included registered primary voters in South Carolina, Iowa and New Hampshire. The key takeaway from the poll is that voters think that prescription drug prices are an important topic for 2016 Presidential candidates, including more than eight in 10 who would support a presidential candidate who says that more must be done to ensure drug companies are acting responsibly and that there is broad competition (82% – South Carolina, 82% – New Hampshire, 84% – Iowa).

This poll and the recent legislative initiatives indicate public awareness and frustration surrounding price spikes and shortages is clearly growing. Promoting a competitive generic drug marketplace through policies and actions from Congress and the FDA is the best way to help mitigate future shortages while also putting downward pressure on prices so that healthcare stakeholders and patients have access to the medicines they need.


Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org.

About the Author

Curtis Rooney

Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org