Issue Date: February 29, 2016
How a regulatory technicality blocks generic drug development
The only way to boost a price by more than 5,000% is to bend the laws of supply and demand in your favor. Turing Pharmaceuticals and its infamous chief executive, Martin Shkreli, presumably knew this before they upped the price of a tablet of Daraprim from $13.50 to $750.
Turing’s trick was to limit supply through a controlled distribution system that was set up just before the firm acquired the toxoplasmosis drug in August 2015. This restricted access may also have thwarted competition by preventing generic drug developers from getting the samples they need to show that their versions are bioequivalent.
To stop such tactics, generic drug makers, pharmaceutical ingredient suppliers, and others in the drug supply chain are calling for changes. The Food & Drug Administration and Congress are trying to create fixes while balancing concerns about patient safety, access to low-cost drugs, and commercial interests. But legal and legislative solutions are slow to emerge.
According to a 2014 survey of generic drug manufacturers sponsored by the Generic Pharmaceutical Association, $5.4 billion in annual U.S. pharmaceutical spending could have been saved if restricted access moves had not delayed generic versions of 40 drugs from getting to the market.
The generics industry says delays can be caused both by restricted access programs such as Turing’s and by a government-created program called a risk evaluation and mitigation strategy, or REMS. Congress created the safety program in 2007 to provide patients with access to drugs that otherwise might have been too dangerous to be approved.
About 75 drugs have an FDA-mandated REMS, which can call for patient and provider education, training, and monitoring. About 30 drugs that present the most serious risks are also subject to restricted distribution through “elements to assure safe use,” or ETASU, controls.
“Increasingly, a large number of new drugs have an ETASU, and although a minority, it is still an important number of products,” says Ameet Sarpatwari, a doctor and lawyer with Harvard Medical School and Brigham & Women’s Hospital’s Program on Regulation, Therapeutics & Law. Under the pretext of not wanting to violate a REMS, brand-name firms are “using safety concerns to prevent generics manufacturers from gaining samples of their drugs for bioequivalency testing,” Sarpatwari says.
Claiming they’ve been blocked in this way, several generics companies have sued pharma firms for allegedly violating antitrust laws. In response, the pharma firms point to REMS restrictions. They also say they have no legal duty or obligation to sell their drugs to generics competitors and are free to choose with whom they do business.
In separate cases involving Actelion Pharmaceuticals and Celgene, the Federal Trade Commission filed amicus briefs with the courts. In the filings, FTC suggested that “actions that block generics access may violate antitrust laws” and that “distribution agreements are not immune from antitrust scrutiny.”
Because a few lawsuits are still under way and some were settled out of court, the courts have not ruled entirely on the merits of either position, Sarpatwari points out. Also unknown is whether the settlements involved any payments between the companies. But a search of FDA’s REMS database does reveal that the generic versions of the drugs in dispute have yet to emerge.
At the end of 2014, FDA tried to address the sample-sharing problem through draft guidance. The agency can issue a letter when it has determined that a generic drug developer’s bioequivalency studies have safety protections comparable to those in the brand-name firm’s REMS. And FDA won’t consider it a violation of the REMS if the brand-name firm makes the reference drug available for testing.
Although it’s a “meaningful step,” the guidance may not have any practical effect, Sarpatwari points out. “FDA is limited in what it can do,” he says, because it doesn’t have the authority to mandate sample sharing. In fact, generics firms have complained that brand manufacturers aren’t handing over samples even after being given FDA letters.
In a 2015 letter to his senator, Peter J. Werth, president of the generic drug ingredient supplier ChemWerth, suggested an altogether different solution that circumvents the need for samples. He proposed that FDA publish the data used to approve brand-name drugs so generic drug developers can accurately compare their data to demonstrate bioequivalence.
Congress is trying yet another fix. The Fair Access for Safe & Timely Generics Act was introduced in the House of Representatives in mid-2015, and similar legislation is expected soon in the Senate. Under the FAST Generics Act, brand-name firms would be compelled to provide samples upon request in the absence of a REMS and under FDA authorization of the generics developer if there is a REMS.
The Generic Pharmaceutical Association and 10 other health-care-related groups wrote a letter in support of the act, but others want to protect the REMS program as it stands.
One supporter of the status quo is the nonprofit Alliance for the Adoption of Innovations in Medicine, whose commercial collaborators in 2015 included the brand-name drug makers Allergan, Bristol-Myers Squibb, Celgene, and Genentech. By ensuring safe use, the REMS program allows beneficial but risky drugs for serious diseases to reach the market, explains Stacey L. Worthy, an attorney and the alliance’s director of public policy.
The proposed legislation, Worthy says, would require brand-name drug manufacturers to supply samples to firms that lack the same REMS safeguards. And brand manufacturers would be unable to monitor and track dangerous products because they can be prevented from learning the identity of the receiving party, she adds.
Worthy and the alliance are also concerned about who can obtain samples in the first place. “The definition of an ‘eligible product developer’ is overly broad and ambiguous,” she says, raising the possibility of product diversions and illegal use.
Overall, the generic drug development process is working, Worthy contends. Although some “bad actors” are using non-REMS restricted distribution as an excuse to avoid sharing drugs for testing, “the distinction that needs to be made is that, with REMS, restricted distribution is necessary,” she says.
Of the 75 drugs with a REMS, nearly a dozen have generic equivalents, including nine requiring ETASU provisions, and more are awaiting FDA approval, Worthy points out. “If the brand manufacturers weren’t willing to provide samples, those medications never would have been approved.”
Asking government to step in to force access “is problematic because it takes away the ability of the manufacturers to negotiate on their own,” she says. If anticompetitive issues arise, generics companies have the recourse to sue, she adds.
It’s true that companies generally do have the right to choose with whom they do business, Sarpatwari says, but the way the generics market works is a little different. When the Hatch-Waxman Act helped launch the generic drug industry 30 years ago, it created a trade-off.
“Brand-name companies have been given a specific period of market exclusivity in exchange for then allowing generics to come on the market,” Sarpatwari says. “Given that structure, there should be an expectation of at least being cooperative or at least engaging with these generics companies and allowing samples to be provided to them.” He sees the FAST Generics Act as the best way to ensure this happens.
When a generic version of a drug covered by both a REMS and an ETASU does get approved, FDA generally requires the parties to implement a single, shared REMS program, a cooperation that has occurred about six times. Actelion says it is negotiating a shared REMS for its antihypertension drug Tracleer with seven generics companies.
A single REMS is considered the best and safest option because it is the most transparent to patients and doctors. However, sharing a REMS can be complicated because some pharmaceutical companies are patenting their programs, Sarpatwari points out. Alternatively, FDA can allow a generics firm to create a separate REMS, although that has happened only rarely.
Developing, implementing, and administering a REMS can be time-consuming and costly. As drugs lose patent protection, the question arises whether brand manufacturers will want to continue to bear the burden and whether generics firms have the capabilities to do so. In 2012, FDA was charged with measuring the effectiveness of the REMS program. Both sides are still awaiting the results.
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