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$761 million

Study: Blocking Generic Drugs is a Costly and Common Pharma Tactic

Nearly half of brand-name drugs studied had delayed generic competition leading to an estimated $761 million in lost savings to Medicaid and state budgets.

Generic competition can dramatically lower prescription drug prices, but brand-name pharmaceutical companies frequently work to block generic drugs from coming to market — a tactic that is both common and costly, according a new study that specifically examined the impact on Medicaid spending.

Among the 69 brand-name drugs studied by researchers, nearly half (45 percent) saw delayed generic competition or no competition at all – a trend that likely cost Medicaid $761 million over 7 years compared to if generic drugs entered the market in a timely fashion, according to a study published in the June issue of Health Affairs by Dr. Chintan Dave, Dr. Aaron S. Kesselheim, and other researchers affiliated with Brigham and Women’s Hospital and Harvard Medical School.

While brand-name pharmaceutical companies have engaged in a variety of strategies to hamper generic competition, the researchers of the Health Affairs analysis “Estimating the Cost of Delayed Generic Drug Entry to Medicaid” found that patent litigation was the most common cause for delay, used in 80 percent of the cases of delayed generic entry studied by researchers.

Most of the cases of patent litigation examined by the researchers were settled out of court, raising concerns that “brand-name manufacturers may be offering incentives to generic manufacturers in exchange for terminating ongoing patent challenges,” according to the study, which was supported by Arnold Ventures. These settlements may be mutually beneficial to the brand-name and generic manufacturers while costing patients and taxpayers millions.

In addition to the patent litigation, researchers also noted citizen’s petitions were also filed in many cases (67 percent of those studied), which may have led to delayed approval by the U.S. Food and Drug Administration of generic competitors, according to the study.

This strategy by pharmaceutical companies to thwart competition and maintain high brand-name prices to extract large amounts of revenue has important implications for state budgets and taxpayers, the study found.

The excess costs paid by Medicaid were underwritten by taxpayers at a time when states have struggled to balance their budgets, cutting teacher pay and slashing pensions while for-profit pharmaceutical companies continued to increase their revenues and pay large dividends to shareholders.

The findings from the Medicaid program also hint at an even larger toll on U.S. health care spending. Medicaid covers 23 percent of insured people in the U.S.; the remaining are covered by commercial insurance or by Medicare. These programs are not granted the same statutory rebates as Medicaid and therefore pay more for drugs generally, which means these purchasers most certainly overpaid for drugs with delayed or nonexistent generic competition well in excess of the Medicaid lost savings estimated by researchers.

As the coronavirus pandemic continues and the United States faces an unprecedented economic collapse, it’s more urgent than ever for policymakers to protect patients, employers, and taxpayers from paying excessive amounts for high-priced drugs, said Kristi Martin, Vice President of Drug Pricing at Arnold Ventures.

“Brand-name drug manufacturers blocking appropriate price competition has led to millions in lost savings,” said Kristi Martin, Vice President of Drug Pricing at Arnold Ventures. “With unemployment at an all-time high, and Medicaid enrollment increasing, states and taxpayers cannot afford delayed generic entry. Policymakers need to address patent abuses and anti-competitive behaviors that lead to these market failures.”

To curtail anti-competitive behavior, researchers recommended widely publicizing predicted generic entry dates to alert regulators and payers of delays that could merit deeper investigation and, if needed, enact certain remedial measures to ensure timely market entry.

They also recommended that policymakers require the U.S. Patent Office and Trademark Office expand an administrative process known as “inter partes review” in which patent disputes are required to be resolved within a year for all follow-on patents disclosed to the FDA to be automatically reviewed to “weed out improperly granted patents before they require extensive litigation in court,” the study says. This option is considered less costly and more efficient, according to the study.

Read the study: https://www.healthaffairs.org/...