New Senate Bill Aims to Close Regulatory Loopholes Blocking Generic Drug Competition

Posted 15 June 2016 By Zachary Brennan

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Members of the Senate Judiciary Committee introduced bipartisan legislation on Tuesday that seeks to stop anticompetitive practices brand name drug companies often use to thwart or delay the entry of less-expensive generic versions of their products.

Backed by 19 physician, pharmacist, hospital and consumer groups, including the Generic Pharmaceutical Association (GPhA), Public Citizen and the largest US pharmacy benefit manager, Express Scripts, the bill, known as the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act of 2016, revives the idea, first unveiled in other bills in 2015 and highlighted by the Federal Trade Commission in 2014, that drug companies should not be able to game the system to prevent generic competition for off-patent drugs.

Bill Specifics

The bill focuses on two tactics often employed by the brand name drugmakers to halt or delay generic competition, including:

  • Sample-sharing, which occurs when brand name drugmakers prevent potential generic competitors from obtaining samples of the branded product, so the generic company cannot perform the testing necessary to show that its product is equivalent to the brand-name product, which is a prerequisite for FDA approval.
  • Participation in a shared safety protocol, which occurs when branded manufacturers claim to require a distribution safety protocol (known as a Risk Evaluation Mitigation Strategy with Elements to Assure Safe Use, or “REMS with ETASU”) and then refuse to allow generic competitors to participate in that safety protocol, which further undermines generic drugmakers’ abilities to gain FDA approval.

The CREATES Act allows a generic companies facing one of these delay tactics to bring an action in federal court for injunctive relief (i.e. to obtain the sample it needs, or to enter court-supervised negotiations for a shared safety protocol).

The bill also authorizes judges to award damages to deter future delays.

REMS

Codified in the 2007 Food and Drug Administration Amendments Act (FDAAA), FDA is authorized to require a REMS when it’s necessary to ensure that a drug’s benefits outweigh its risks, though REMS can appear in a variety of forms.

A REMS may be required by FDA as part of the approval of a new product, or for an approved product when new safety information arises and a strategy to manage a known or potential serious risk associated with a medicine is necessary to enable patients to have continued access to such medicines.

For example, according to an FTC amicus brief from 2013, a REMS might require that pharmacies selling a drug be enrolled in a REMS and that the pharmacist verify that the prescriber and patient are also enrolled before dispensing the drug. And in implementing a REMS, branded drugmakers sometimes restrict how the drug is distributed to patients, though recognizing that certain REMS programs could be used to impede generic competition, Congress included language in FDAAA clarifying that REMS provisions may not be used for such purposes.

However, as Geoffrey Manne, Executive Director of the International Center for Law & Economics, noted Tuesday, “even if these companies are using REMS to delay generics, such a practice makes for a terrible antitrust case. Not only does the existence of a regulatory scheme arguably set Trinko squarely in the way of a successful antitrust case, but the sort of refusal to deal claims at issue here (as in Trinko) are rightly difficult to win because, as the DOJ’s Section 2 Report notes, ‘there likely are few circumstances where forced sharing would help consumers in the long run.’”

And brand name drugmakers have also previously implemented distribution restrictions for drugs that are not subject to a REMS, according to the FTC, while FDA has sent letters clarifying that a particular brand firm may sell REMS drugs subject to restricted distribution programs to particular generic firms for bioequivalence testing without violating the REMS.

The bill’s text also notes that FDA “has reported receiving significant numbers of inquiries from generic product developers who were unable to obtain samples of covered products to conduct necessary testing and otherwise meet requirements for approval of generic drugs.”

Currently there are 99 generics with only one generic competitor, 66 with two competitors, and all the rest have multiple competitors, according to FDA statistics presented at a hearing on the generic drug application backlog.

Reaction

The Congressional Budget Office has estimated that legislation similar to the CREATES Act would save the government over $2 billion in 10 years because of the new generics that would gain entry to the market.

Offering his support for the bill, Chip Davis, President and CEO, GPhA, said in a statement: “It is worth noting and recognizing recent efforts by representatives in the branded industry to highlight the valuable role generic medicines play in driving healthcare system savings, including their support for reducing the backlog of pending ANDA [abbreviated new drug] applications at the FDA. However, continued use of these anticompetitive practices by certain manufacturers drives the exact opposite outcome; delaying or eliminating alternative treatment options to advance patient outcomes while continuing to increase healthcare costs.”

But not all drugmakers and industry groups offered their outright support for the bill. PhRMA spokeswoman Holly Campbell told Focus: “Risk Evaluation and Mitigation Strategies (REMS) are a critical regulatory tool for protecting patient safety. While we are currently reviewing the legislation, we would be concerned if patient safety could be jeopardized in any way."
The Senate Judiciary Committee will hold a hearing on the bill next week.

Fact Sheet on the Bill
Hearing Next Week
Bill

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Categories: Generic drugs, Crisis management, Regulatory strategy, Regulatory intelligence, News, US, FDA, DOJ, FTC, Business and Leadership

Tags: generic drug competition, CREATES Act, REMS

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