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A Small Win on Drug Pricing Was Added to the U.S. Budget, but Does it Go Far Enough?

Congress opens the door for increased generic drug competition with passage of the CREATES Act, but more aggressive action remains stalled.

Amid the flurry of legislative activity at the end of 2019, a small but important win for drug pricing advocates largely went unnoticed — as part of the 2020 continuing resolution to fund the government, U.S. lawmakers approved a simple, bipartisan fix to an anticompetitive practice exploited by pharmaceutical companies for far too long.

While the newly passed CREATES Act has the potential to chart a path toward lower-cost medications for Americans in the coming years, its impact is marginal compared with the sweeping federal proposals still under debate in Congress.

Under the law, if brand drug manufacturers attempt to withhold product samples from generic manufacturers — samples the generic makers need to produce safe, effective, and low-cost generics — those companies can sue the brand manufacturers for damages. This means that, for a small subset of drugs, consumers should have access to lower cost generics sooner.

This is important because generics are typically significantly cheaper for consumers, and studies have shown that the entry of generic drugs into the market inflicts significant downward cost pressure on existing brand name drugs.

The CREATES Act attempts to end a longstanding practice by brand name companies to deny generic manufacturers samples they need to make cheaper generic versions of the drug by exploiting a federal drug safety program intended to ensure safe use and distribution of drugs with higher risk of serious side effects.

The U.S. Food and Drug Administration has estimated that such abuses cost the U.S. health care system $13.4 billion every year by delaying generic entry. The Congressional Budget Office has found that past versions of the CREATES Act would save taxpayers nearly $4 billion over 10 years.

However, while creating a legal pathway for generic manufacturers to pursue legal action certainly represents a common sense change that is long overdue, it unfortunately is not an answer for the immediate relief that patients need and want.

Because the law only affects drugs that are susceptible to generic competition — the FDA has previously identified 55 drugs that refused to give generic drug developers product samples — it will likely take years for consumers to see meaningful savings at the pharmacy counter. And it’s important to note that the marginal relief provided by the CREATES Act fails to deliver on the comprehensive, more aggressive action that Americans are demanding. In a poll earlier this year, more than 8 in 10 voters said that prescription drug prices are unreasonable, and a majority called for Congressional action to reduce prescription drug costs.

Meanwhile two other legislative proposals — the House of Representatives’ Elijah Cummings Lower Drug Costs Now (H.R. 3), which passed in December but appears unlikely to gain traction in the Senate, as well as the Senate’s Prescription Drug Pricing Reduction Act (PDPRA), which has stalled in the Senate — contain real, bipartisan ideas that would offer substantial financial relief for patients, taxpayers, and employers.

In 2020, Congress and the President must build on this foundation and pass meaningful drug pricing reform.