The high cost of prescription drugs creates an enormous barrier to treatment. According to the U.S. Department of Health and Human Services, more than 5 million Medicare beneficiaries had difficulty affording their medications in 2019; Black and Latino beneficiaries were more likely than white beneficiaries to face cost-related barriers.
A report from the Congressional Budget Office (CBO) found that both the Medicare and Medicaid programs have paid significantly higher prices since 2008 for brand-name prescription drugs. One silver lining is the downward trend in the average net price of prescription drugs overall, due in part to the increased use of generic drugs.
In this blog post, we describe Biden administration and Food and Drug Administration (FDA) strategies to strengthen competition in the prescription drug industry and speed development and review of generic drugs to make prescription drugs affordable for more Americans.
According to the CBO analysis, the average net price of all prescription drugs decreased from $57 in 2009 to $50 in 2018 in Medicare Part D and from $63 to $48 in Medicaid. However, generic drugs’ tempering effect on drug spending may be limited going forward because of already high generic dispensing rates — 90 percent of all drugs dispensed are already generics. The report also notes the challenges associated with making generic forms of newer, high-cost brand-name drugs, particularly biologic drugs.
FDA Takes Steps to Remove Barriers to Generic Drug Development
In September 2021, the Biden administration released a Comprehensive Plan for Addressing High Drug Prices. Among its “guiding principles for drug pricing reform” is a focus on increasing competition, including promoting the development and availability of generic drugs.
As part of the policy and regulatory proposals contained within the administration’s report, the FDA reaffirmed its commitment to supporting generic drug competition through the agency’s Drug Competition Action Plan. The FDA announced the initiative in 2017, with the goal of making the review process for generic drugs more transparent and efficient. Since its launch, the FDA has released guidance on the following objectives:
- improving the efficiency of the generic drug development, review, and approval process
- maximizing scientific and regulatory clarity concerning complex generic drugs
- closing loopholes that allow brand-name drug companies to “game” FDA rules in ways that delay the generic competition Congress intended
The agency recently released additional recommendations related to generic drug application submissions, labeling, and review. Taken together, these steps provide clarity to generic drug manufacturers to help them navigate the agency’s regulatory requirements and speed up the generic drug review process. The program is having a positive impact. Since 2016, the FDA has consistently increased the number of “first” generic drug approvals year over year, which improves competition and lowers prices.
Industry User Fees Speed Access to Generic Medications
Another measure that may help ensure generic drugs continue to lower overall drug spending is the renewal of the Generic Drug User Fee program at the FDA.
According to the Congressional Research Service, the agency’s median review time for new generic drugs in March 2012 was approximately 31 months, with a backlog of more than 2,500 applications. To address this issue, Congress enacted the Generic Drug User Fee Amendments in 2012. User fees are collected by the FDA from generic drug manufacturers to help finance important regulatory functions, such as reviewing drug applications and inspecting manufacturing facilities. According to the FDA, since the enactment of the program, the agency’s application approval time and rates have improved, bringing more generic drugs to market and increasing pricing competition.
The generic user fee program is reauthorized by Congress every five years, with the most recent reauthorization slated to expire on September 30. In a letter submitted to Congress in January outlining future performance goals and enhancements for the program, the FDA promised to act on a number of commitments. For instance, the agency will aim to review most original generic drug applications within 10 months of submission, issue new guidance to help encourage the development of more complex generic products, and hire 128 new staff for the generic drug review program.
On February 3, the Subcommittee on Health of the House Committee on Energy and Commerce held a hearing on several FDA user fee reauthorizations, including the generic drug user fee program. In its remarks, the FDA argued for reauthorization of user fee programs, noting the critical role that user fees play in ensuring the agency has the resources it needs to review drug applications in a timely fashion. The agency also discussed critical improvements that user fees will support, including enhancing review processes and hiring new scientific talent to support program needs.
Access to generic drugs has been a bright spot in the nation’s efforts to hold down pharmaceutical spending. Whether it starts to fade will depend in part on the industry’s ability to bring new products to market through a well-defined and well-functioning regulatory process. Continued implementation of the FDA’s Drug Competition Action Plan and renewal of the Generic Drug User Fee Amendments are important steps to maintaining success.
