President Trump has made lowering the cost of medications a priority ahead of the 2020 presidential election, so looking for a win on this issue is paramount. One idea that seems to have universal acceptance within his administration is the need to increase the number of generic drugs in the marketplace. In theory they are exact replicas of their brand-name counterparts with a lower price, an apparent win-win for American patients.
The reality of these policy considerations, as you can imagine, is much more complicated. The president and lawmakers should carefully consider current market dynamics and unintended consequences before advancing any proposals that empower generics manufacturers with additional market share.
For starters, off-patent generic drugs do not always provide the free market competition you would expect. Recently 44 states sued 20 generics drug manufacturers for price fixing and colluding to minimize competition.
This kind of behavior reaches up to the highest level of corporate boardrooms. In January 2017, the CEO of Heritage Pharmaceuticals and another executive at the company both pleaded guilty for conspiring to collude with other drug makers. Recently unsealed complaints meanwhile have shown the second-most senior executive of another generics manufacturer, Mylan, allegedly told his rivals that he would “play fair” and divide up market share for a key antibiotic in order to maintain pricing control.
The result of this price fixing has often been higher costs. Doxycycline, the antibiotic these very executives were allegedly cooperating on to control price and market allocation shot up 8,281 percent around the time Heritage Pharmaceuticals entered the market. This is not an isolated incident. 1,215 generics, many of them the most prescribed drugs, jumped on average more than 400 percent in a single year.
Unfortunately much like purported price reductions, the safety and efficacy of generics drugs cannot always be guaranteed either. At least 80 percent of the drugs we consume are produced outside of the United States, often in facilities with lax oversight.
Despite a surge in the number of generic drug approvals, FDA inspections performed across the globe dropped by 11 percent in 2018. Oftentimes these inspections must be announced in advance, giving the opportunity for companies to put on “show inspections” where key documents may be falsified or destroyed. In the case of some Chinese facilities, admittance has been refused altogether.
These issues with data integrity are causing doctors to question whether or not generic drugs are working the way they’re intended. Investigative journalist Katherine Eban, who performed a deep dive into the dangers associated with some parts of the generic drug industry, found that many medical professionals have started to avoid prescribing generic drugs after numerous cases in which patients reported problems after switching off brand-name drugs. Given recent issues with a broad range of generic drugs, from blood pressure medication to blood thinners, these concerns are understandable.
There is no question that generic drugs will continue to play a role in our medical system moving forward, but too often they receive the benefit of the doubt in Washington. Blindly opening the door for more generic drugs to enter the market may not be the safest or most effective way to achieve the goal of lowering drug prices. Instead the president should focus more on the work he is doing to bring more transparency to the marketplace such as banning “gag order” clauses at the pharmacy and should crack down more aggressively on price fixing schemes.
The conventional wisdom, that generics are good because they bring down costs, has not always proven to be the case and masks a dangerous mentality that allows substandard pharmaceuticals to enter our supply chain. The first priority of our policymakers should be to protect Americans from unsafe medicines. The second should be to ensure free and fair competition in the pharmaceutical space. Striking this balance is key to ensuring Americans continue to enjoy access to lifesaving drugs for years to come.
