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Industry Groups Explain Competition Issues in the US Pharma Market

Posted 05 January 2018 | By Zachary Brennan 

Industry Groups Explain Competition Issues in the US Pharma Market

Industry groups representing generic and brand-name drugs, pharmacy benefit managers (PBMs) and pharmacies offered their comments on a November meeting held at the Federal Trade Commission (FTC) on possible solutions to increase competition and lower pharmaceutical prices in the US.

The organizations discussed differing views on what can be done, with the generic group noting its own declining prices and possible ways to combat abuses, the brand-name industry pointing to rising PBM and supply chain costs while PBMs discussed savings they provide and pharmacists called for more transparency.

Generics

One of the main ideas behind the US Food and Drug Administration's (FDA) push to reduce prices is to increase the number of generic competitors on the market. The agency has taken several recent steps in promising to expedite the review of certain generic drug applications with limited competition.

The generic industry group, known as the Association for Accessible Medicines (AAM), noted barriers to competition can include "delays in approval; the inability to acquire the active pharmaceutical ingredient (API); ingredient cost and supply fluctuations; a low potential for return on investment driven by extensive consolidation in the wholesale and retail markets for generics; and wide-scale annual price deflation."

In defense of its claim that generics companies are seeing a declining slice of the pharmaceutical industry's pie, the group said: "For every $100 spent on dispensing generic medicines in this country, approximately $65 goes to the distribution and reimbursement of those products by the members of the supply chain. PBMs make nearly three times as much on generics as they do on brands. Wholesalers make about eight times more. Pharmacies make more than 10 times for every $100 spent on generics than brands."

AAM also discussed FDA's recent decision to publish a list of off-patent, off-exclusivity drugs without an approved generic, noting, "The list contains 264 products, and consists of 83 products that are often deemed inappropriate development candidates due to their product type and the capital investment required (for example, radiopharmaceuticals, amino acid/electrolyte replacements). Of the remaining 181 potential products, 144 products have low volume sales, which reduces the attractiveness of developing the product."

As far as action items, AAM encouraged Congress to take up the CREATES Act, and said it "believes that actions should be taken to prevent monopolistic behavior by powerful purchasing organizations" and that "the agencies and Congress should work to eradicate abusive delaying tactics that hinder generic competition."

Brand-Name Drugs

The Pharmaceutical Research and Manufacturers of America (PhRMA), meanwhile, took issue with several proposed ways to fix a system in which it says, "More than $140 billion of US brand sales are projected to face generic competition between now and 2021. Competition from biosimilars is estimated to account for $38 billion of the loss in brand spending."

As discussed in the November meeting, PhRMA discussed how payers' actual prices for brand-name medicines have climbed "at modest rates, despite more rapid growth in publicly reported list prices."

The group pointed to the middlemen PBMs as part of the problem, particularly as they "increasingly chang[e] the contractual definition of rebates to exclude certain administrative fees, allowing the PBM to retain these payments rather than passing them back to the plan sponsor. These administrative fees can be as high as 25% to 30% of the total rebate negotiated with the manufacturer and are often not reported to the plan sponsor by the PBM."

PhRMA also took issue with one of FDA Commissioner Scott Gottlieb's comments at the meeting, calling on FDA to "make public further information underlying the Commissioner's statement that FDA 'has received more than 150 inquiries from generic companies that want to develop generic drugs but tell us they are unable to do so because they cannot get access to supplies of the RLD [reference listed drug] to do the testing needed for a generic application.'"

The group also sounded the alarm over FDA's idea of publicly releasing REMS letters the agency sends to certain companies.

"If FDA proceeds with the public release of REMS letters, it must follow its regulations implementing the Freedom of Information Act (FOIA) in connection with any such public disclosure. In particular, FDA must redact from the letters any trade secret or confidential commercial information of either the prospective ANDA applicant or RLD sponsor," PhRMA said. "PhRMA is concerned, however, with the implication that the agency's REMS letters somehow evince that 'generic drug makers may be having trouble getting access to branded drugs.' Such letters do not demonstrate an access problem but instead demonstrate that the generic applicant has obtained FDA's confirmation that it has instituted appropriate safety measures."

Another section discussed a proposal raised at the FTC meeting to allow abbreviated new drug application (ANDA) applicants to use foreign-approved products as reference standards in bioequivalence (BE) studies, which PhRMA said, "would raise scientific, safety, and legal issues."

PBMs and Pharmacies

The Pharmaceutical Care Management Association (PCMA), the national association of pharmacy benefit managers (PBMs), meanwhile, touted its ability to negotiate lower drug prices, noting, "PBMs evolved because they increase the value of prescription drug benefits.

"A recent study of the top 200 self-administered, patent-protected, brand-name drugs shows no correlation between the launch prices or price increases manufacturers set and the rebates they pay to PBMs," PCMA said. "There are many cases of high-priced drugs that carry low rebates and low-priced drugs that carry high rebates. Some high-priced drugs have no rebate at all." The group offered the following chart:

pcma

And the National Alliance of State Pharmacy Associations (NASPA) called for greater transparency related to certain aspects of the PBM industry, including, "Manufacturer rebates: how they affect PBM formularies, the amount the manufacturer pays vs. the amount passed through to PBM clients; Maximum allowable cost (MAC) pricing: how the prices are set, the 'spread' between the price paid to the pharmacy and the price charged to the PBM client."

The National Community Pharmacists Association (NCPA) also focused its comments on the "the overall lack of transparency" regarding the role of PBMs in the drug supply chain and their influence on drug pricing and consumer access to medications.

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