The Food and Drug Administration plans to take steps aimed at curbing the ability of pharma companies to delay or ward off generic competition by "gaming" regulatory rules, a sign the regulator could take a more active role in addressing drug pricing challenges under agency chief Scott Gottlieb.
The FDA doesn't have a direct role in determining prices and is not allowed to factor cost into its decisions on approving new drugs. Gottlieb's planned actions, however, could make it easier for generic drugmakers to bring copycat medicines to market sooner, which would lower costs over time.
Although few specifics were disclosed in a blog post announcing the plan, Gottlieb highlighted the practice of making brand-name products unavailable for comparative testing as one example of "gaming" that could be targeted.
Though public furor over rising prescription drug costs has battered the image of pharma, the industry's principal regulator largely has its hands tied when it comes to prices.
Gottlieb's plans, while a new direction for the agency, reflect that reality. The FDA can encourage competition and tailor regulations to lower the potential for regulatory arbitrage, but has very little scope to directly influence price setting — particularly for on-patent drugs.
Unbranded generic drugs account for more than 80% of all prescriptions written in the U.S, but only about 15% of the total invoice spending, according to data compiled by QuintilesIMS. Higher use of specialty medicines and pricey biologics are responsible for an outsized share of the burden felt by the healthcare system.
And any actions aimed at boosting generic competition, by definition, wouldn't have any impact on branded drug spending until much later in the product's lifespan.
Even so, Gottlieb's actions could be a blow to drugmakers that specialize in buying up older, off-patent drugs and dramatically raising the price. Such companies — exemplified by Martin Shrkeli's Turing Pharmaceuticals and, to a lesser extent, Valeant Pharmaceuticals — targeted markets with few suppliers and limited competition. With a de facto monopoly, the Turing and Valeants of the world could enjoy greater pricing power at a low cost of entry, knowing any competitor seeking to undercut them would need months or a year to develop a similar copy and file with the FDA.
"We know that sometimes our regulatory rules might be 'gamed' in ways that may delay generic drug approvals beyond the time frame the law intended, in order to reduce competition," Gottlieb wrote. "We are actively looking at ways our rules are being used and, in some cases, misused."
In some cases, brand-name drugmakers have made it difficult for potential generic competitors to buy up sufficient quantities of drug product to run tests and develop a copy. Contractual limitations in supply agreements with distributors could restrict access, Gottlieb noted, while mandated Risk Evaluation and Mitigation Strategy (REMS) programs on certain drugs could be abused to block generic medicine makers acquiring product samples.
The FDA plans to hold a public meeting on July 18 to gather comments and input on areas where regulations have been misused to create artificial hurdles to generic access.
Gottlieb made clear that targeting "gaming" would just be an initial step in the agency's efforts to address generic drug markets — efforts that could later involve greater coordination with the Federal Trade Commission.
"It is the FTC’s responsibility to prevent anticompetitive business practices," Gottlieb wrote. "But Congress set out certain laws that are meant to strike a careful balance between pharmaceutical innovation and access to lower cost generic products, and FDA has an important responsibility to enforce those laws in a manner that adheres to the balance struck by Congress."
Improving access to generics and reducing the scope for regulatory arbitrage could remove the last lines of defense for a branded product or single-source generic drug.
The other side of the coin
Gottlieb also has plans to speed up the regulatory process for innovative new products.
In a hearing before a subcommittee of the Senate Appropriations Committee Tuesday, the FDA commissioner sketched the outlines of another initiative, dubbed the "Medical Innovation Development Plan."
"Ultimately, the most tangible way we're going to reduce healthcare costs is by finding new and better treatments for vexing diseases like diabetes and cancer and neurodegenerative ailments like Alzheimer's," Gottlieb said in his prepared remarks to the Senate panel.
An initial step on this front will focus on clarifying the FDA's position and updating guidance on targeted drugs, especially those aimed at rare diseases. The agency plans to update guidance on drug development techniques used to accelerate development of targeted therapies, such as clinical trial enrichment strategies or adaptive trial design.
At the hearing, Gottlieb also committed to rolling out new guidance within six months that will cover drugs targeting specific genetic variations, clarifying when the FDA would see fit to broadly OK a drug based on a biomarker.
Such guidance is needed sooner rather than later, particularly in oncology.
Just last month, Merck's flagship cancer immunotherapy Keytruda (pembrolizumab) won a landmark approval from the Food and Drug Administration for tumors with a certain biomarker, regardless of where that cancer developed in the body. Other companies, such as Loxo Oncology, have made progress in developing drugs using a similar approach.