Greater Access to Generic Drugs
New FDA initiatives to improve drug reviews and reduce legal
You might think that lower cost means lower quality, but that's not the case
with prescription drugs, 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 form. For example, ibuprofen is the generic version of
the OTC pain medicine Advil. Last year, the FDA approved the first generic of
the prescription anti-seizure drug Neurontin (gabapentin). Generics have the
same quality, safety, and strength as branded medicines. But for an average
brand-name drug that costs $72, the generic version costs about $17.
At roughly one-third the price of brand-name medications, generics 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 plans, its 40 million beneficiaries could see potential savings of $14
billion in 2003.
The FDA has made it a priority to encourage the availability of generic drugs.
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,"
says former FDA Commissioner Mark B. McClellan, M.D., Ph.D. "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
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 drugs typically lasts an average of 11 years. A
generic drug can only enter the market after the brand-name patent or other
marketing exclusivities have expired and FDA approval is granted.
But rising drug costs remain a major challenge for consumers, especially older
Americans. "This is where generics play an essential role," McClellan
says. "Once the appropriate patent protection has expired, generic medicines
give patients an alternative."
On Dec. 8, 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 coverage.
In addition, the FDA also continues initiatives to improve access to generic
drugs. These initiatives involve revamping the FDA's review process to put generic
drugs into consumers' hands more quickly. The fiscal year 2005 FDA budget request
includes increases in funding for the FDA's generic drug program. The additional
funds would go toward increased staff and other improvements to speed up generic
drug reviews. The FDA routinely evaluates the generic drug review program to
find ways to increase efficiency and get quality products into the hands of
consumers to improve the public health.
How Generics Get on the Market
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
"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
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 drug is "bioequivalent" to another, it means that its active
ingredient works in the same way and in the same amount of time as the brand-name
drug. 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," he
says. As an incentive for generic drug firms to submit ANDAs to the FDA, the
first generic challenger of patents is awarded a period of marketing exclusivity.
Reducing Legal Barriers
The Medicare Modernization Act will close legal loopholes in the Hatch-Waxman
Act that delay generic drug approval. For example, only one 30-month "stay"
is allowed under the Act if an innovator company sues a generic company over
patent issues. This may occur after a generic applicant certifies that an innovator's
patent will not be infringed. Unless the innovator sues within 45 days after
such notice, there is no 30-month stay. The innovator can still sue, but no
30-month stay results.
A stay is the term for the delay in generic approval that occurs when a brand-name
company files a patent infringement lawsuit. This delay is meant to be a 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.
A limit of one 30-month stay is in line with recommendations from the Federal
Trade Commission (FTC). According to an FTC study released July 30, 2002, there
were cases involving several brand-name drugs between 1994 and 2000 in which
repeated 30-month stays 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. Examples
of delaying tactics include submitting patent information on the color of the
pill bottle, ingredient combinations, and other minor matters that don't affect
the drug's effectiveness or safety.
Such strategies have been seen only in 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
Bush has said, "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 new regulation that went into effect Aug. 18, 2003, implements another FTC
recommendation, to tighten the patent submission and listing process so that
only appropriate patents are submitted to the FDA. To help prevent unfair competition,
the regulation 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 approved uses of a drug. Certain patents, such as those
for packaging claims, are among those that cannot be submitted. More detailed
information will now be 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 Modernization Act.
"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 testimony before the Senate Judiciary Committee on June 17, 2003, Bruce
N. Kuhlik, PhRMA's senior vice president and general counsel, cautioned against
changes that could "undermine incentives for continued pharmaceutical innovation."
He said, "The Hatch-Waxman Act of 1984 is achieving its purpose of speeding
market entry of generic drugs."
Kuhlik pointed out that since the law was enacted, the generic share of the
drug market has soared, and so has the expense of developing new drugs. "Our
patent laws and regulations provide a key incentive for continued innovation
in medicines," Kuhlik said. "Better treatments and new cures can come
only from pharmaceutical research companies, and only if patent incentives are
More Efficient Reviews
2003, the FDA approved 263 generic drugs. The agency also issued 101 tentative
approvals of generic drugs. A tentative approval indicates that final approval
of the application is delayed due to patent or exclusivity issues. In 2003,
479 applications were submitted for review. This is up from 392 the year before.
It takes 20 months on average for a new generic drug to be approved by the
FDA, and it usually involves multiple review cycles. 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. With the proposed increases for the generics
budget, the FDA plans to increase resources that would make earlier communications
The agency plans to hire more review experts to help speed up the review of
generic drug applications so that review time can be reduced by at least two
months. The goal is to provide guidance to industry to allow for submission
of more complete of applications the first time they are submitted, rather than
going through multiple review cycles because of problems. Each round of review
generally means many months delay in approval.
The new resources, along with other improvements, such as adding another chemistry
review division, are expected to reduce the total time to approval for most
new generic drugs by three months or more over the next three to five years.
One new approach will be to develop an FDA standard for giving generic companies
initial feedback on obvious minor deficiencies within 10 days after the first
review cycle is completed. Applicants will have an opportunity to respond and
amend an application to try to avoid a whole new review cycle.
Getting the Word Out
"Generic Drugs: Safe. Effective. FDA Approved." That's one of the
slogans featured in an FDA consumer education program to promote consumer confidence
in generic drugs. The FDA messages have been featured in newspaper articles,
posters, and brochures highlighting the safety and effectiveness of generic
drugs. Public service announcements have appeared in major magazines and journals,
as well as on the radio. Posters and brochures are being distributed at major
pharmacies throughout the country. Advertisements rolled around on buses in
Chicago, Los Angeles, and New York, and have appeared on billboards in Michigan.
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 generics
over brand names when generics are available. And 24 percent reported not being
able to afford a prescription drug when no generic was available.
Richard Cole, senior vice president of corporate communications at Blue Cross
Blue Shield of Michigan, says in a statewide survey he conducted in the summer
of 2001, most people said they believe generic drugs are equivalent to brand-name
drugs. "In the past, the conventional wisdom was that if we increased education
about generic drugs, it would look like our only motives were to save money
for the company," Cole says. "But consumers reported that they saw
it as our job to tell them about generic drug options."
In the fall of 2001, Blue Cross Blue Shield invited all Michigan pharmacies
to participate in a competition to increase generic dispensing rates. The goal
was to increase generic use among Michigan Blues members by one percentage point,
which would result in a $17 million savings for both the company and the customers,
Blue Cross Blue Shield challenged pharmacies to develop in-store campaigns
and tracked generic dispensing rates. More than 1,000 Michigan pharmacies competed.
The prize for the stores with the highest rates: featured spots in a $1 million
advertising campaign with the slogan "Generic Drugs--The Unadvertised Brand."
Rite Aid won for the retail chain category and Grand Value Drugs of Detroit
won for the independent pharmacy category. Cole estimates that the annual savings
for Michigan Blues members was more than $30 million.
"People don't want a less expensive drug if they think the quality isn't
good," Cole says. "When you or a member of your family gets sick,
you don't want second best. But you don't have to worry about that with generic
The FDA's Center for Drug Evaluation and Research would like to hear from organizations
interested in partnering with the FDA on its generic drug education program.
For more information about a potential partnership, call (301) 827-7503.
FDA Requirements for Generic Drugs
- Generic drugs must have the same active ingredients and the same labeled
strength as the brand-name product.
- Generic drugs must have the same dosage form (for example, tablets, liquids)
and must be administered in the same way.
- Generic drug manufacturers must show that a generic drug is bioequivalent
to the brand-name drug, which means the generic version delivers the same
amount of active ingredients into a patient's bloodstream in the same amount
of time as the brand-name drug.
- Generic drug labeling must be essentially the same as the labeling of the
- Generic drug manufacturers must fully document the generic drug's chemistry,
manufacturing steps, and quality control measures.
- Firms must assure the FDA that the raw materials and finished product meet
specifications of the U.S. Pharmacopoeia, the organization that sets standards
for drug purity in the United States.
- Firms must show that a generic drug will remain potent and unchanged until
the expiration date on the label before it can be sold.
- Firms must comply with federal regulations for good manufacturing practices
and provide the FDA a full description of facilities they use to manufacture,
process, test, package, and label the drug. The FDA inspects manufacturing
facilities to ensure compliance.