Could Laws And Regulations Price Consumers Out Of Generic Drugs?

Regulatory and Legal Reasons for the Generic Drug Skyrocketing Costs: NCPA

A new study by National Center for Policy Analysis finds that drugs are the best bargain in the health care system – but that may change if recent price hikes continue.

In What Is Increasing the Cost of Generic Drugs? Part II: Regulatory and Legal Reasons Generic Drug Prices are Rising, author and NCPA Senior Fellow Devon Herrick says, “Compared to the funds spent on doctors and hospitals, prescription drug therapy is a cheap. Generic drugs are especially cheap; accounting for 88 percent of drug prescriptions filled but only 28 percent of expenditures on drug therapies.”

Slow FDA approvals are lessening generic competition. “The FDA’s backlog of 4,000 generic drug applications is hindering competitors who could hold prices down,” says Herrick. “The Food and Drug Administration simply cannot process new applications from competitors fast enough.”

Also, older generic drugs are often made on aging production lines, which are sometimes shut down for maintenance. Lines can be stopped after the manufacturer is warned by the FDA that the facility is out of compliance with good manufacturing practices. The resulting shortage often drives prices higher.

Thousands of drugs predate the FDA’s approval process required under the 1938 Food, Drug & Cosmetics Act — many were grandfathered but never officially approved. Herrick added, “The FDA wants these cheap drugs off the market and replaced with more costly ‘approved’ versions from any drug makers willing to conduct clinical studies on them.”

State regulations also bite consumers in the wallet. Generic substitution laws in some states make it harder for consumers to save. In the face of rising drug prices, many states have passed laws that worsen the situation, such as banning efficient pharmacy networks, restricting mail-order pharmacies, and restricting maximum allowable cost lists.

The NCPA study highlights several ways to lower America’s drug bills, including:

• Clearing the FDA’s backlog of applications to manufacture generic drugs;
• Resist passing perverse regulations designed to protect local business;
• Promote competition in the production of generic medications.

“Much of the recent rise in the price of generic drugs can be directly linked to regulatory and legal causes,” says Herrick. “Unfortunately, unwise drug plan regulations have also boosted consumers’ costs when filling a prescription for a generic drug.”

This study is Part II of Herrick’s in-depth examination of the rising costs of generic drugs.The first part of the study examined reason within the generic drug supply chain that result in rising costs.

What Is Increasing the Cost of Generic Drugs? Part II: Regulatory and Legal Reasons Generic Drug Prices are Rising: http://www.ncpa.org/pub/what-is-increasing-the-cost-of-generic-drugs-part-ii-regulatory-and-legal-reasons

About The National Center for Policy Analysis
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems — in health care, taxes, retirement, education, energy and the environment. For more information, visit http://www.ncpa.org/index.php.