Generic drug approvals surge, but hundreds still aren’t for sale

The Trump administration has been trumpeting a huge increase in FDA generic drug approvals the past two years, the result of its actions to streamline a cumbersome process and combat anti-competitive practices. But nearly half of those newly approved drugs aren’t being sold in the United States, Kaiser Health News has found, meaning that many patients are deriving little practical benefit from the administration’s efforts.

The administration’s aggressive push to approve more generics is designed to spur more competition with expensive brand-name drugs, and drive prices lower, President Donald Trump noted at a White House event this month. The Food and Drug Administration has approved more than 1,600 generic drug applications since January 2017 – about a third more than it did in the last two years of the Obama administration.

But more than 700, or about 43 percent, of those generics still weren’t on the market as of early January, a KHN data analysis of FDA and drug list price records shows. Even more noteworthy: 36 percent of generics that would be the first to compete against a branded drug are not yet for sale. That means thousands or even millions of patients have no option beyond buying branded drugs that can cost thousands of dollars per month.

“That’s shockingly high,” said former congressman Henry Waxman, who co-sponsored the 1984 law that paved the way for the generic approval process as we know it today. He said he’d like to know more, but suspects anti-competitive behavior is at least partly to blame and that revisions to the so-called Hatch-Waxman Act might be needed.

The approved generics that haven’t made it to American medicine cabinets include generic versions of expensive medicines like the blood thinner Brilinta and HIV medication Truvada. They also include six different generic versions of Nitropress, a heart failure drug, whose price spiked 310 percent in 2015.

Experts say a variety of factors are to blame. Generics sellers have fought for years against patent litigation and other delay tactics that protect brand-name drugs from competition. In recent years, vast industry consolidation has reduced the ranks of companies willing to purchase and distribute generics. And, in some cases, makers of generics obtain approvals and ultimately make a business decision to sit on them.

“It’s a real problem because we’re not getting all the expected competition,” FDA Commissioner Scott Gottlieb said in an interview, adding that it will be difficult to solve because it has so many causes. It takes five generics on the market to drive prices down to 33 percent of the original brand-name price, according to an FDA analysis.

Without generics to lower drug costs, branded manufacturers can continue to increase their prices, at a rate of roughly 10 percent a year, said Scott Knoer, chief pharmacy officer at the Cleveland Clinic. “It makes health care costs go up across the board.”

Even if hospital patients don’t directly see high drug prices in their bills, the higher costs get passed to insurers, who pass them on as higher premiums, Knoer said. They also get passed to taxpayers, who pay for drugs covered by Medicare and Medicaid.

Consolidation on multiple tiers of the drug supply chain have changed the face of the generic drug market, warping supply and demand.

In some cases, key pharmaceutical ingredients are unavailable or a manufacturer doesn’t have the capacity to launch a product because it’s having difficulty meeting demand for existing products.

Manufacturing consolidation has dramatically reduced the production of injectable drugs, which are typically administered in a doctor’s office. This may be why 157 injectable generics that were approved in the past two years haven’t been brought to market.

Erin Fox, a pharmacist at the University of Utah who tracks drug shortages, said the KHN analysis of stalled generics “highlights that companies often have a lot of products ‘on the books’ but aren’t really making them.” A few generics on the list – like dextrose 10 percent injection, to treat patients with low blood sugar – would have been helpful to combat shortages the past few years. “This comes up with shortages a lot – it looks like there are more suppliers than there really are,” Fox said.

A lot can change between the time a drugmaker files a generic application with the FDA and the time it’s approved.

Some drugmakers that applied for generic approval years ago switched their attention to more profitable products. Novartis, for instance, recently sold a generics division run by Sandoz so Sandoz could focus on other drugs, including biosimilars, which compete with expensive biologic drugs made from living organisms.

“Some of these [generic] drug applications have been sitting six, seven, eight years,” said Robert Pollock, a former acting deputy director of the FDA’s Office of Generic Drugs who now works for Lachman Consultants. By the time it’s approved, a generic can fall out of favor because patients taking the branded version reported new side effects, or because a more effective branded drug was approved.

For some generic manufacturers, there’s money to be made by waiting. Brand-name drugmakers will pay them to keep their products off the market as part of a tactic sometimes called “pay for delay.” The Federal Trade Commission estimates that such deals cost consumers and taxpayers $3.5 billion a year.

The number of these potentially anti-competitive settlements decreased from fiscal 2014 to fiscal 2015, according to the latest FTC report. Still, Gottlieb said he hopes to crack down on such tactics. The first generic to take on a branded drug is granted 180 days of exclusivity before the second and third generics can be approved, giving those products a clear advantage.

“We don’t like that companies are able to just park [a generic for] 180 days while they cut a deal not to come to market,” Gottlieb said, adding that with help from Congress he hopes to force companies to forfeit exclusivity if they don’t launch on time.

In some cases, Gottlieb said, generic drugmakers wait until they’ve stockpiled a number of newly approved generics and have landed a contract with a purchaser before bringing their medicines to market.

These bundled contracts are secretive, so not much is known about them, but it means companies are filing generic applications just for the option of introducing generics, said health care economist Rena Conti, an associate professor at Boston University. They’ll wait until the most strategic time to launch, which could be after the competition shakes out, leaving them as “the last man standing,” Conti said. Then they can launch and hike the price.

To be sure, the FDA under Gottlieb’s leadership has taken steps to increase generic competition, from shaming brand-name drugmakers for blocking generics to publishing documents to help manufacturers win approval more easily. But approval doesn’t necessarily spur competition.

“We used to say it was all about getting in – once you got approval from the FDA, then you could go to market,” said Chip Davis, CEO of the Association for Accessible Medicines, the trade group for makers of generic drugs. The biggest challenges his members face is that there aren’t enough companies purchasing drugs, Davis said. Consolidation has led to three large buying groups covering 90 percent of the market, according to a Drug Channels Institute report. So, if you’re the fourth or fifth generic, you may have no one left to sell to.

Yet another barrier relates to how drug middlemen select the drugs they’ll cover under industry formularies, which determine what products insurance plans will cover. In some cases, middlemen known as “pharmacy benefit managers” have made it clear they don’t have room on their formularies for another generic. Or they do, but they give branded drugs preferential treatment with lower copays, hurting the generic’s market share.

Barriers to entry are lower under Gottlieb’s FDA than they’ve been in years past, Conti said, and regulations can help foster competition. But, she said, “they can only do so much.”

Methodology

To identify approved drugs that have not reached the market, KHN used the FDA’s Orange Book database – as of Jan. 2 – to identify drug applications approved in 2017 or 2018. We then searched the FDA’s online National Drug Code directory for billing codes for the drugs associated with each application as of the same date. To account for a possible lag, we supplemented this list with a more complete billing code directory that we obtained via a Freedom of Information Act request. It includes codes with expected future launch dates that don’t appear in the online version.

According to experts, a billing code doesn’t necessarily mean a drug is on the market. However, every drug on the market needs a list price for reimbursement. We provided a list of application numbers and billing codes to information technology firm Connecture, which then told us whether each one was active, inactive or had no list price as of Jan. 17.

If an application had at least one billing code with a list price attached, we counted it as on the market, even if other billing codes did not have list prices.

Sometimes, a single generic application can have multiple approval dates. If one of these approval dates occurred in the last two years, we included it in our analysis.

To determine whether a drug was a first generic, KHN used the FDA’s 2017 and 2018 lists of first generics as of Jan 2.