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Perpetually increasing prescription drug prices ravage everyday Americans. Specifically, name-brand prices outpace inflation by about 50%, largely due to government-protected market power. A beacon of hope for reducing drug prices are the generic and biosimilar drug industries, which produces existing brand drugs and biologics drugs cheaply. But big Pharma doesn’t want competition, so it does everything it can to block generic and biosimilar innovation. The CREATES Act, H.R. 2212, solves a loophole commonly abused by big pharmaceutical companies for unlawful market advantages in the emerging generics and biosimilars markets.
Existing drug companies exploit the Food and Drug Administration’s (FDA’s) Abbreviated New Drug Application (ANDA) requirements for FDA approval of competitive generic and biosimilar products. This is an unlawful tactic to increase market-power. Biosimilars are a type of biologic drug – drugs manufactured from living cells – that mimic both the composition and the function of an existing biologic drug but employ cheaper production processes. Tragically, established producers prevent aspiring competitors from completing ANDA.
To complete a generic or biosimilar approval process, applicants must acquire sample drugs from existing producers. This allows medical researchers to demonstrate that the functions and properties of the original brand drug and the new generic or biosimilar are, in fact, equivalent. Sadly, many brand companies refuse to provide samples to potential competitors, preventing them from gaining approval. Thus, innovative generics and biosimilars hit the market less frequently, trapping consumers with fewer options and higher prices. While this practice of abusing distribution networks is illegal, there are no enforcement mechanisms preventing it.
Remember the damnable pharmaceutical executive Martin Shkreli, who raised the price of a biologic AIDS drug Daraprim by over 5000% in one night? One of his profit-protection methods was to deny competitor applicants the samples they need to earn FDA approval. Competing with losers like Shkreli would be easy it if weren’t for this loophole. High school chemistry students reproduced Daraprim for less than $2 a pill compared to Shkreli’s $750.
A similar monopolistic scam employed by entrenched pharmaceutical companies involves exploiting shared Risk Evaluation and Mitigation Strategy (REMS) procedures. Producers of existing brand drugs are sometimes required by the FDA to establish safety protocols that protect consumers from safety risks. The FDA encourages companies to share, or streamline, their REMS procedures for maximum safety and congruency among user experiences. If a person taking biologic drug X switches to biosimilar drug X, the shared procedure is supposed to ensure that there are no major differences in how this person safely consumes the drug. In a similar fashion to denying samples, big pharma often refuses to share REMS procedures. When a REMS program has previously been required, FDA cannot approve a generic or biosimilar until a shared REMS has been negotiated or the agency has been given sufficient evidence to waive the requirement. This imposes redundant and costly burdens on biosimilar producers, and ultimately delays market entry for far less expensive but equally safe drugs.
Both of these tactics, refusal to share samples and failure to fairly negotiate shared REMS programs, establish de facto monopolies for original drug producers, but they’re easily fixed by the CREATES Act. Under the CREATES Act, generics and biosimilar manufacturers will be able to seek injunctive relief in court against companies that withhold samples or REMS information. This will improve competition with new generics and biosimilars, reducing prescription drug costs possibly as much as 40%. It will also help sustain Medicare Part D, the national deficit, and debt, by reducing government drug expenses by up to $5 billion per year.
Congress should end illegal monopolies and help Americans afford their medications by passing the CREATES Act, all without increasing the size of government.