Ordinary Americans, reporters, and even a congressional panel heaped scorn on pharmaceutical company Mylan after it raised the price of its epinephrine injector set from $100 to more than $600.
Mylan deserves criticism for making it harder for patients to afford the injectors they need to prevent fatal allergic reactions. But Mylan isn’t the only culprit in this scandal. The FDA is sitting on a huge backlog of generic drug applications. Such bureaucratic lethargy enables companies to form monopolies and gouge consumers.
Policymakers could solve the problem by giving the FDA the mandate and resources to clear this backlog. Instead, they’re training their fire on innovative drug companies that have nothing to do with this price gouging. Their proposed crackdown on these firms wouldn’t stop abusive pricing practices, but it would stifle innovation and deprive patients of lifesaving new medicines.
Price gouging is only possible when companies face no competition. The FDA has created just such a scenario. In October, a full 2,996 generic drug applications were pending approval or review. At least two of those would have offered allergy sufferers an alternative to Epi-Pens.
But the FDA has stalled both applications. The agency complains that one product uses a slightly different design than Epi-Pen, and that the manufacturer of the other product left some testing data out of the application.
This nitpicking is ridiculous. Researchers developed epinephrine in 1901. It’s now off-patent — as are the older, perfectly effective, designs for injectors. The only thing stopping companies from creating an inexpensive, generic epinephrine injector is FDA lollygagging.
Other firms have taken advantage of the agency’s delays. Turing Pharmaceuticals infamously hiked the price of Daraprim, a medicine used to treat AIDS patients, from $13.50 to $750 overnight. The drug hit the market 62 years ago, so its patent expired long ago. Likewise, Valeant Pharmaceuticals increased the prices of the off-patent heart drugs, Isuprel and Nitropress, by 525 percent and 212 percent.
These companies got away with upping their prices so dramatically because they knew the FDA would take years to approve competing products.
When manufacturers introduce generic drugs to the market, prices plummet. The introduction of a second generic drug cuts brand-name drug prices in half, on average.
If policymakers want to prevent price gouging, they simply need to enable the FDA to approve applications far quicker than the current average of 47 months.
Instead of enacting these targeted solutions, many of our leaders are on the warpath against the research firms that spend billions of dollars to create innovative new medicines. They’re calling for all manner of direct and indirect price controls.
Inventing and bringing a new drug to market is a risky and expensive endeavor. It costs about $2.6 billion and takes 10 years.
When a company does strike gold — developing a unique product and gaining FDA approval — restricting competition for a limited time makes sense. Patents give the company a chance to recoup its massive investment in research and development, and ultimately reinvest its profits in developing other new treatments.
Price controls would take away the financial rewards of drug development.
It’s worth paying for truly innovative drugs. But once medicines go off patent, there’s no reason for consumers to continue shelling out top dollar. Speeding the generic drug approval process would introduce competition, slash prices, and prevent rapacious behavior.
Sandip Shah is the founder and president of Market Access Solutions. He spent nearly three decades working at large pharmaceutical firms, where he developed pricing and reimbursement strategies.