Editorial Board

The FDA's War on (Expensive) Drugs

Commissioner Scott Gottlieb has it right: The way to make prescription drugs more affordable is to boost competition from generics.

A champion of generic drugs.

Photographer: Zach Gibson/Getty Images

One of the FDA’s main jobs is to ensure that the drugs Americans take are safe and effective. Whether they’re affordable has always been someone else’s problem.

Enter Scott Gottlieb, the new commissioner of the U.S. Food and Drug Administration, who wants to reduce drug prices significantly. It’s a worthy cause, and his strategy -- to enable greater competition from generic drugs -- makes sense. But the FDA can’t do it by itself.

Lack of competition is the main reason that drug spending, which accounts for about 17 percent of U.S. personal health-care costs, has been rising so much. Almost three-fourths of that spending goes to brand-name drugs, even though they make up just 10 percent of medicines consumed. When generics come on the market, prices fall substantially. In the past decade, Gottlieb says, generic drugs have saved the U.S. health-care system $1.67 trillion.

Too often, however, competition from generics doesn’t arrive quickly enough. A new drug gets market exclusivity for five to seven years, granted by the FDA, and patents usually extend that period. This government-sanctioned monopoly is justified because pharmaceutical makers deserve some time to recoup their investment and earn a profit.

At the same time, brand-name drug makers engage in some questionable behavior to extend their monopolies. They find ways to prevent generics companies from buying the hundreds of doses needed to conduct comparative studies, for example. Or they apply for more patents, prompting lawsuits from generic competitors, which they then settle by paying the generics maker to delay or give up on their plans to copy.

The FDA, as a mere regulatory agency, can’t do much about these kinds of practices (although Gottlieb says he has sent 150 stern letters to drug makers). Other parts of the government can, though. A Senate bill would enable generics makers to go to court to obtain the samples they need. Stronger oversight by the states and the Federal Trade Commission, meanwhile, could curb so-called pay-for-delay agreements, which may violate antitrust laws.

What the FDA can do is shorten the time it takes to approve generic drugs. That period has been known to last years, but Gottlieb would like to shrink it to as little as eight to 10 months, especially in cases where only one generic copy exists. The FDA has published a list of medicines that no longer have protected monopolies but have, as yet, no generic competitors, and says it will fast-track applications for copies until at least three have been approved. The FDA should also consider allowing the importation of generics that have been approved by other well-regulated countries.

Gottlieb, who has been on the job for less than three months, has set himself an ambitious goal. The FDA’s power to reduce the price of prescription drugs is limited, but its campaign to use generics to foster greater competition deserves wide support.

    --Editors: Mary Duenwald, Michael Newman

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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