By Todd Ebert
Healthcare providers such as hospitals, clinics, and long-term care facilities are facing greater financial pressure than ever before as they continue in their mission to provide high-quality care to patients. In addition to cost pressures associated with implementing the Affordable Care Act and shrinking reimbursement rates that are forcing hospitals to make tough choices about spending on labor and supplies, an unexpected recent cost-driver has come in the form of dramatic price spikes in the generic drug market.
Generic drugs have long been relied upon to increase access to, and reduce costs of, essential medications. Robust competition in the generic market has driven down costs for providers and patients alike. Recently, however, significant price spikes for some generic drugs that are long since off-patent have begun to jeopardize patient access to affordable healthcare.
Supply chain organizations and healthcare group purchasing organizations (GPOs) often see spikes occur for products where there are two or fewer manufacturers in the market, and where a lack of competition among manufacturers allows high prices to go largely unchecked. Limited manufacturing options also mean that quality control problems and disruptions to manufacturing can jeopardize supply and give rise to drug shortage situations – which also allow the opportunistic manufacturers remaining in the market to further drive up their price on common generic drugs.
Compounding the problem of price spikes is the current backlog of new generic drug applications at the U.S. Food and Drug Administration (FDA). Since the Generic Drug User Fee Act (GDUFA) was negotiated in FY2011, the FDA’s backlog has continually risen along with its median review time for product approval. A private sector survey revealed that prior to GDUFA, review time for an Abbreviated New Drug Application (ANDA) was 30 months. In FY2013, that time had risen to 36 months, and in FY2014 is estimated to be 42 months. A wait time of three to four years is currently stifling the ability of manufacturers who want to introduce competition to the generic market and help mitigate price spikes.
GPOs continue to be a private-sector solution for increasing competition and reducing costs. But common-sense actions are still needed to make the generic drug market healthy, competitive, and accessible to the providers and patients for whom these drugs are urgently needed.
Congress needs to act
The Healthcare Supply Chain Association (HSCA) and our member GPOs are committed to reducing costs and increasing competition and innovation in the market. We recently urged Congress to implement practical measures to mitigate generic drug price spikes. In our letter, we urged Congress to make express the FDA’s authority to expedite review of ANDAs in instances where there are only one or two existing manufacturers for a product or in instances where there have been recent price spikes. We’ve also asked the FDA to make their ANDA list public, because transparent conditions will help fuel a competitive generic market.
HSCA has additionally provided direct feedback to the FDA regarding collecting quality metrics from drug manufacturers. Using quality metrics to monitor establishments involved in the manufacture, preparation, propagation, or processing of human drugs will empower the FDA to make critical decisions about risk-based scheduling, prediction of drug shortages, and related price spikes.
We encourage the FDA to hold all suppliers, foreign and domestic, to the same quality standards for data collection and risk-based inspection – and to focus on suppliers that have not yet been inspected or that have a history of compliance problems. There should be consequences for any organization manufacturing or distributing products for U.S. markets that chooses not to provide quality metrics. And after being reviewed by FDA, metrics should be made publicly available to increase transparency and accountability among drug manufacturers.
Drastic price spikes in generic drugs are already a serious problem, and recent news headlines about some generic manufacturers driving up the prices of generic drugs by hundreds or thousands of percent overnight simply because they can, suggest that the problem is becoming more acute.
HSCA and our supply chain members are committed to helping alleviate the burdens of these spikes, so that healthcare facilities can channel their energies into providing first-class patient care. We encourage Congress to also take common-sense steps to help ensure that FDA has the ability to act to prevent and address price spikes.
Todd Ebert, R.Ph., is the president and CEO of the Healthcare Supply Chain Association.