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A Special Report from FDA Consumer Magazine
You might think that lower cost means lower quality, but that's not the case with generic drug products, says Gary Buehler, R.Ph., director of the Food and Drug Administration's Office of Generic Drugs. "The FDA ensures a rigorous review of all drugs, and consumers can be assured that generic drugs are as safe and effective as brand-name drug products," he says.
Generic drugs are copies of brand-name drugs and are available in both over-the-counter (OTC) and prescription forms. For example, ibuprofen is the generic version of the OTC pain medicine Advil. Last year, the FDA approved a generic form of the anti-seizure drug Neurontin or gabapentin, an example of a prescription drug. Generics have the same quality, safety, and strength as branded medicines. But the average price for a prescription for a brand-name drug is $84.20, while the average price for a generic drug prescription is $30.56, according to the National Association of Chain Drugstores.
Generic drugs can bring consumers significant savings. A 2002 study by the Schneider Institute for Health Policy at Brandeis University in Waltham, Mass., concluded that if Medicare increased the rate of generic usage to that of similar high-performing private sector health plans, its 40 million beneficiaries could see potential savings of $14 billion.
Because generic drugs play a key role in making health care more affordable, former FDA Commissioner Mark B. McClellan, M.D., Ph.D., made it a priority to encourage their availability. This effort continues. At the same time, FDA experts say there is no question that brand-name drugs are also essential.
"Generic drugs are possible only as a result of the development of new innovative drugs, and this innovation requires significant investment," McClellan said. "Without fair compensation from meaningful patent protection, drug research and development would slow or stop." According to the Boston-based Tufts Center for the Study of Drug Development, the cost to develop a new drug averages $897 million. The Pharmaceutical Research and Manufacturers of America (PhRMA) reports that its member companies invested about $32 billion in 2002 in discovering and developing new medicines.
A brand-name company submits information to the FDA on patents it holds on a drug and their expiration dates. Then the agency lists patents on new drugs in the publication "Approved Drug Products with Therapeutic Equivalence," also known as the Orange Book. Patent protection gives brand-name companies, also known as innovator companies, the sole right to sell a drug for a certain period of time. This allows them to fairly recoup their investment costs. Patent protection for a drug typically lasts an average of 11 years. A generic drug can enter the market only after the brand-name patent or other marketing exclusivities have expired and FDA approval is granted.
Rising prescription drug costs remain a major challenge for consumers, especially older Americans. Generics can play an essential role by providing less expensive medication when appropriate patent protection has expired.
In December 2003, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 was enacted. Title XI of that act provides for, among other things, limits on certain court actions that could delay availability of generic drugs. The move is expected to save consumers billions of dollars, as well as lower costs for government- and employer-provided health care coverage.
In addition, the FDA continues initiatives to improve access to generic drugs. These initiatives involve streamlining the FDA's review process to get generic drugs into consumers' hands more quickly. Any additional funding in the budget for the generic drug program would go toward increases in staff and other improvements to speed up generic drug application reviews. The FDA continuously evaluates the generic drug review program to find ways to increase efficiency and get quality products into the marketplace to improve the public health.
The main reason generic drug companies can market their drugs at lower prices is that they don't face the same development costs as brand-name companies. Under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, generic drug companies don't have to repeat expensive clinical trials.
"The Hatch-Waxman Act essentially created the generic drug industry," says Buehler. Roughly two decades ago, generics made up only 12 percent of all prescriptions. Now, generics represent over 50 percent of all prescriptions filled in the United States, according to the Generic Pharmaceutical Association (GPhA). "The law paved the way for many more generic drugs because rather than repeating research, generic drug companies instead must show the FDA that their drugs are bioequivalent to the brand-name drug," Buehler says.
When a generic drug is "bioequivalent" to a brand-name drug, its active ingredient works in the same way and in the same amount of time. Scientists measure a generic drug's bioavailability--the amount of the generic drug in the bloodstream and how long it takes to get there. Then they compare that measurement to the brand-name drug. While innovator companies submit full new drug applications, generic companies submit what are known as abbreviated new drug applications (ANDAs). Along with showing that a generic drug has the same bioavailability as the brand-name drug, generic companies must prove that their products have the same active ingredient, follow the same quality manufacturing standards, and have similar labeling. (See "FDA Requirements for Generic Drugs.")
The competition encouraged by the Hatch-Waxman Act helps to keep drug costs down and also spurs innovator firms to develop more new drugs, Buehler says. "The law aims to protect the intellectual property rights of innovator companies, while also encouraging the development of generic drugs." Under some circumstances, a period of exclusivity may be available to the first generic for a product on the market.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 has closed some legal loopholes that delayed generic drug approval. For example, the act allows only one 30-month "stay" of approval of the generic when an innovator company sues a generic company over patent issues.
A stay is the term for the delay in generic drug approval that occurs when a brand-name company files a patent infringement lawsuit. This delay is implemented to allow time to resolve issues about whether a generic drug company is infringing a drug patent. During the stay, the FDA cannot approve the generic drug.
The limit of the number of 30-month stays is in line with recommendations from the Federal Trade Commission (FTC). According to an FTC study released in 2002, there were cases involving several brand-name drugs between 1994 and 2000 in which repeated 30-month stays of approval delayed access to generic drugs. Access to generic drugs has sometimes been delayed from four to 44 months when drug companies have used various methods to get repeated 30-month stays. Often the patents were for minor matters that did not affect the drug product's effectiveness or safety. The innovator can still sue, but no 30-month stay would occur.
Use of this and other strategies has been seen in only a minority of drug firms. And, according to PhRMA, stays are rare. But the FTC concluded that multiple stays can have substantial financial impact and are "harmful to consumers." President George W. Bush has stated, "Our message to brand-name manufacturers is clear: You deserve the fair rewards of your research and development; you do not have the right to keep generic drugs off the market for frivolous reasons."
A regulation that went into effect in August 2003 implements another FTC recommendation. That is to tighten the patent submission and listing process so that only appropriate patents are submitted to the FDA to help prevent unfair competition. The final rule clarifies the types of patents that must be submitted to the FDA. Companies must submit patent information on active ingredients, drug formulations, and compositions, and on approved uses of a drug. Certain patents, such as those for packaging claims, are among those that cannot be submitted. More detailed information is now required on patent submissions, and false statements could lead to criminal charges.
Kathleen Jaeger, GPhA president and chief executive officer, praised the announcement of the generic drug regulation and said it complements generic drug access provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.
"GPhA strongly believes that the administration's initiatives, coupled with substantial legislative measures in the compromise legislation, will ensure that American health care becomes more affordable," Jaeger said in a statement. The legislation overlaps with the FDA's regulation in one area in that it would also prevent multiple 30-month stays in the approval of generic drugs.
In fiscal year 2004, the FDA approved 320 generic drugs. The agency also issued 93 tentative approvals of generic drugs. A tentative approval indicates that final approval of the application is delayed because of patent or exclusivity issues. In fiscal year 2004, 563 applications were submitted for review. This is up from 449 the year before.
The median time to approval of a new generic drug application has been reduced to approximately 16 months. Very few applications are approved on the first cycle, but about a third are approved on the second cycle. Sometimes, multiple review cycles can't be avoided, but the FDA has identified the lack of early communication between generic drug companies and the FDA as one cause for multiple review cycles. The FDA continues to work toward early communication.
The agency plans to continue hiring review scientists to help speed up the review of ANDAs to continue to reduce total time to approval. Also, the agency is providing assistance to the industry in workshops and seminars to allow for submission of more complete applications. This has the potential to reduce total review time. The addition of a new chemistry division and additional bioequivalence review teams are expected to reduce the total time to approval for most new generic drugs.
"Generic Drugs: Safe. Effective. FDA Approved." That's one of the slogans featured in an FDA education program to promote consumer confidence in generic drugs. The FDA messages have been featured in newspaper articles, posters, and magazines. Public service announcements have appeared in major magazines and journals as well as on the radio. Posters and brochures, some in Spanish, are being distributed at pharmacies throughout the country. Advertisements rolled around on buses in several major cities, appeared on billboards in Michigan, and have run in movie theaters in some major markets.
Consumers want lower-cost options for drugs, according to AARP, a nonprofit organization that addresses the needs of people ages 50 and older. In a recent AARP survey of 1,046 people ages 45 and up, 84 percent said generic drugs are important for controlling drug costs. Most also said they usually choose generic over brand names when generics are available. And 24 percent reported not being able to afford a prescription drug when no generic was available.
Examples of recent first-time generic equivalent approvals for brand-name drugs:
The FDA's Office of Generic Drugs
www.fda.gov/cder/ogd/
Generic drugs final rule and initiative
www.fda.gov/oc/initiatives/generics/