Policies to Accelerate Approvals of Generic and Biosimilar Drugs

This analysis was updated on May 31, 2017, to reflect newly introduced legislation.

The availability of generic drugs—which can be priced 80 percent lower than their branded equivalents—increases competition and reduces spending on pharmaceuticals. The Generic Pharmaceutical Association estimates that generic drugs generated $254 billion in savings in 2014.

In addition to traditional generics, biosimilars, which are “highly similar” to a biologic drug (a protein or other material derived from living cells) already approved by the Food and Drug Administration (FDA), are becoming available in the U.S. With prices expected to be 30 percent lower than that of a reference biologic, biosimilars could reduce drug spending by $44 billion over a 10-year period.

As an incentive for innovation, Congress provides the companies making new drugs with patent protections and exclusive marketing rights for a period of years. During this time, the drug sponsor has monopoly power and can price its product at levels the market will bear; but when the patents and exclusivity expire, lower-cost competitors can enter the market and force prices down.

Such competition is impaired, however, when generic and biosimilar developers are unable to acquire the innovator drug for comparative testing. This may occur when the drug is subject to a risk evaluation and mitigation strategy (REMS) or when there are other limits on its distribution.

Risk evaluation and mitigation strategy

To manage serious known or potential risks associated with a drug, FDA can require manufacturers to develop a REMS, which can include a requirement to distribute educational materials. As of March, 78 drugs were subject to REMS, with 44 of them subject to the REMS requirement known as “elements to assure safe use,” or ETASU, which can require that manufacturers limit distribution of a drug.

Other limited distribution networks

Brand manufacturers can also choose to limit the distribution of their products, even when FDA does not require them to do so. To ensure appropriate prescribing of a high-risk drug that lacks a REMS, a brand manufacturer may distribute it only to trained providers. There are concerns, however, that such limited distribution could also be used to restrict generic developer access. For example, Actelion has been accused by a generic manufacturer of limiting and controlling distribution of its drug Zavesca, which is not subject to a REMS, in order to prevent its acquisition by generic manufacturers. Though little public data exists on the extent to which limited distribution networks are used to restrict generic developer access, at least one payer has acknowledged this effect. On its 2017 Specialty Drug List, CVS/Caremark identified 45 limited distribution drugs, only four of which are subject to a REMS (including two with an ETASU REMS requirement).

Policy proposals

Recent proposals, including bipartisan bills in Congress, are intended to improve generic developer access to brand drugs for product testing. The Fair Access for Safe and Timely (FAST) Generics Act would require brand companies to sell their products, including REMS drugs, to generic developers without restriction. The Generic Pharmaceutical Association notes that according to a 2014 Congressional Budget Office estimate, the FAST Generics Act could generate $2.4 billion in savings over 10 years. In addition, the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act would allow generic developers to sue brand companies in federal court to obtain samples of REMS drugs as well as medications subject to manufacturer-imposed limited distribution networks.

Policy principles

As policymakers consider new approaches to improve generic developer access to brand products, they must balance them with concerns for the safe use of high-risk drugs. Important considerations include:

• Removing unnecessary barriers to generic developers purchasing drug samples needed for product testing. Currently, generic developers can purchase product samples directly from brand manufacturers or from drug wholesalers. However, these transactions in some cases can violate REMS agreements. FDA has issued draft guidance for generic firms on how to request a letter from FDA stating that the proposed product testing protocol is not a REMS violation. It is not clear how effective such communications are when provided to brand developers, however, nor is such guidance in place for generic-makers seeking to obtain product samples from wholesalers.
• Allowing generic developers and brand-makers to negotiate the price of drug samples for product testing as well as the conditions of a shared REMS. A shared REMS is a partnership between brand and generic companies, where a number of conditions must be negotiated between the two parties. Some policymakers have proposed that the price of a drug to a generic developer be set at the wholesale acquisition cost. However, generic companies often are able to negotiate lower prices. Furthermore, though FDA can sometimes allow a generic developer to undertake its own REMS, a shared REMS is often necessary, such as for the implementation of a patient registry. Policies that would impose certain conditions in such a negotiation, such as the price at which a drug must be sold or the time frame during which an agreement must be reached, can have unintended consequences that further delay settlement and the approval of generics.
• Avoiding unwarranted administrative and financial burdens for FDA. New policies should not require FDA to be involved in all negotiations between generic and brand developers. The agency should adjudicate disagreements between brand and generic developers only when the two parties are unable to come to agreement or when they are not negotiating in good faith.
• Maintaining REMS requirements for high-risk drugs. FDA approves a drug when its benefits outweigh its risks. For some drugs, approval with a REMS is necessary to manage potential risks, so any conditions must remain in place to ensure the drug’s safe use.
• Requiring generic developers to meet a brand developer’s existing REMS standards in its product testing protocol. New policies should not reduce safety standards for generic developers, nor should they force them to adhere to more stringent requirements than required under a brand developer’s REMS.

Allan Coukell directs health programs for The Pew Charitable Trusts, and Chuck Shih and Ian Reynolds work on its specialty drugs research initiative.