A recent article in Bloomberg Businessweek discussed the challenges of generic drug makers in bringing affordable drugs to market – even with the U.S. push to make it easier to do so and to lower drug prices. According to the article, “while policy makers are betting that opening the market to a deluge of new medicines and reforming the drug supply chain will help contain rising prices, many widely used copycat medications are already seeing their prices fall at such a rapid rate that their makers are struggling to keep their heads above water.”
There’s no question that there is a need for cheaper-priced alternatives to life-saving drugs and that large pharma companies have held patients hostage to exorbitantly high prices simply because they know they have no alternative.
The life-saving EpiPen is a perfect example. For years the drug’s manufacturer, Mylan, has held the patent, as well as a monopoly on the drug. It hiked prices up by 400 percent in seven years, and held greater than 90 percent of the share of the U.S. epinephrine injector market in 2016. Its four EpiPen patents do not expire until 2025. Part of the problem was that FDA regulations allow for exclusive patents and new drug protection from direct competition from generics for up to seven years. Unfortunately, even when patents expire, approval for production lines can take years, and the FDA can also influence how many competitors exist in a drug class.
Yet, the FDA has been working diligently to speed up approvals to address the growing need for affordable drugs and healthy competition. In August 2018 the first generic version of EpiPen and EpiPen Jr (epinephrine) auto-injector, from Teva Pharmaceuticals, was approved. This move should bring new competition for the lifesaving allergy injection that created public outrage over high drug prices.
While faster product approvals is encouraging (PCI Synthesis has experienced almost double the approvals in 2018 as we did in previous years). There are still many challenges to getting new and affordable drugs on the market while enabling drug manufacturers to stay afloat.
Ironically, the actual costs to make generic drugs is the same as it would be for brand-name drugs, yet brand-name drugs simply enjoy greater margins simple because, protected by patents, they can.
Patent approvals need to be balanced with the need to foster healthy competition. When one company has a stronghold over the entire market for a product that received FDA approval many years ago, they’re able to dictate pricing. While other players can develop a generic and seek approvals, the total market is often too small to justify the costs to comply with the latest and ever-growing FDA requirements.
Often, the cost to complete new rounds of testing, secure additional raw materials and provide the resources to complete the extensive paperwork for all the various filings would surpass the return on investment or would not justify the business risk. Ironically, in many cases the existing product currently on the market and approved years ago would never meet the standards that the generic must meet today.
In addition, as generic drug makers turn to overseas manufacturers to help keep costs down, increasingly more stringent FDA regulations of overseas plants make it difficult and expensive to secure approvals.
An over-regulated industry is not the only reason for soaring drug costs. A shortage of raw materials and specialized equipment can stifle progress. As more and more specific drugs are created, there’s a greater need for often limited raw materials required to produce them. And, often big pharma firms, with deeper pockets and greater buying power, can more easily obtain those materials. Even if the FDA opened up the barriers to entry for generics, consolidation in the industry could occur from this host of new players. Also, as patents expire, the generic drug market could have fewer players competing for sales and once again costs could climb.
So what exactly can Contract Development and Manufacturing Organizations (CDMOs) and other manufacturers do to deliver higher-value complex drugs to enable healthy competition without violating patent protection? Part of the solution can be using different delivery methods, such as extended release formulations instead of immediate release, or injectables over a pill.
Generic drug manufacturers continue to fight an uphill battle as they work to provide the market with affordable alternatives to vital drugs. Yet, generics are needed now more than ever to foster a competitive environment that brings all prices down. With an easing of patent regulations that encourage monopolies, as well as more innovative approaches to drug delivery, there could be room for everyone in bringing life-saving drugs to market.