For at least a decade, Congress has been concerned (not to say obsessed) with drug costs (understandably so, no matter how ineffective; see "FTC to the Rescue Regarding High Drug Prices and Patents"; "Even More Ill-Conceived Remedies from Congress Regarding Prescription Drug Costs"; "More Ill-conceived Remedies from Congress Regarding Prescription Drug Costs"; "A Solution in Search of a Problem"; Senate Once Again Tries to Address Drug Pricing).  A consequence has been a focus on patents and their contribution to the crisis.  Recently, David Gaugh, Interim CEO of the Association for Accessible Medicines (formerly the Generic Pharmaceutical Association) wrote an article entitled "Congress is Ignoring the Best Solution to Reducing Drug Prices" on realclearcolicy.com challenging if not rebutting much of this rhetoric by identifying more relevant sources for increases in drug pricing.

Mr. Gaugh not surprisingly asserts that the only way to reliably reduce drug prices is generic and biosimilar competition.  This case can certainly be made for generic drugs, which have an almost 40-year track record leading to the statistic that "generics and biosimilars account for 91% of prescriptions filled in the U.S. but only 18% of prescription spending."  But Mr. Gaugh argues that these gains are at risk from problems with sustainability of the generic (and biosimilar) drug industries.  As Mr. Gaugh explains, often "the price of generic medicines has fallen to an unsustainably low level, resulting in market exits and creating the optimal conditions for shortages," which shortages are appearing in the aftermath of the economic and supply chain disjunctions caused by the pandemic.  (This statement is ironic albeit truthful, because Mr. Gaugh also quotes FDA statistics that generic competition results in "an astounding 95% price drop on a mature market."  This suggests that the meme that high prices for branded drugs were solely caused by pharmaceutical company greed was incorrect.)

Even the newer generic and biosimilar drugs are "being squeezed" by "historically slow adoption," Mr. Gaugh writes (although the reasons for this between these classes of drugs are likely not to be the same).  With regard to biosimilars, the financial benefits are patent, being "on average more than 50% less than the brand price was when the biosimilar launched" (for drugs that although representing only a fraction of prescriptions, drive almost half of all drug spending) and yet are "woefully underutilized."  Mr. Gaugh uses Humira® as an example, which starting July 1st of this year is subject to competition by several biosimilars (see "The New York Times Is at It Again Regarding Patents").  But who will benefit may not be patients; Mr. Gaugh identifies "middlemen" as being able to exact greater rebates from Humira® sales while formularies are expected (by Mr. Gaugh) to "sideline" these biosimilar equivalents.

Mr. Gaugh uses Semglee, the first interchangeable insulin biosimilar, to illustrate the effect of the market and its participants on this failure of biosimilar substitution to reap the benefits promised by passage of the Biologics Price Competition and Innovation Act (BPCIA) as part of Obamacare.  According to the article:

Semglee has two different prices, one with a slight decrease in price compared to the brand and a high rebate, and another with a major (65%) decrease in price.  Although the lower list price would have translated into lower costs to patients, PBMs have largely stuck with the higher priced brand insulin rather than encouraging use of the lowest list price.

In addition to these economic consequences, Mr. Gaugh also argues that "manufacturing and regulatory challenges, runaway price deflation driven by middlemen market consolidation, and government policies in Medicaid, Medicare and 340B that reduce the financial viability of generic manufacturing."

While conceding that there is no "magic bullet" for correcting (or at least improving) these circumstances, Mr. Gaugh argues that adoption of the following options could provide some solutions:

• Improving FDA internal collaboration between inspectors and its drug shortage staff (DSS) and between the agency and manufacturers working to avoid a shortage,

• Creating a reserve capacity supply of key medicines as well as creating incentives for hospitals to purchase reserve supply at sustainable, long-term fixed price and volume contracts,

• Improving Medicare drug formulary coverage of new generics and biosimilars, and

• Removing financial burdens such as the Medicaid inflation penalty and 340B that make continued production of low-margin generics unsustainable.

Mr. Gaugh concludes his article that both the branded and generic/biosimilar drugs industries are businesses driven by investment and "if government policies continue to penalize low-cost generic medicines and block adoption of new generics and biosimilars" decreased investment may follow.  Which of course will just exacerbate high drug prices and increased shortages that burden the health care system.

While the message of Mr. Gaugh's article are anything but hopeful, it was refreshing for a change to have problems with drug pricing in the U.S. not to focus on (or even mention) patents as being the cause.  That may be a popular refrain from the media and some politicians (see, e.g., "The New York Times Is at It Again Regarding Patents"; "Faux-Populist Patent Fantasies from The New York Times"; "The More the Merrier: The Journal Joins the Times in Complaining about Patents"; "New York Times to Innovation: Drop Dead"; "Science Fiction in The New York Times") but Mr. Gaugh's assessment provides a welcome, informed alternative to what people think "everybody knows."