PERSPECTIVE: AN INSIGHT INTO THE PRICING AND MARKETING OF GENERIC DRUGS

The pricing of prescription drugs has come under scrutiny recently, namely by consumers who believe manufacturers set an extremely high price for highly sought-after prescription drugs for consumer use. Twenty-five percent of Americans who take prescription medication reported increased out-of-pocket expenses, more so today than 12 months ago [1]. How do manufacturers determine the pricing of their prescription drugs? There is no universal formula used for setting prices; however, there are several factors manufacturers consider. One such factor is the research and development of new treatments. The manufacturing of prescription drugs is not what places a high premium on the product. The prices are influenced by “companies incurring high fixed research and development costs to bring [innovative] drugs to the market [2].” The implication being with lowered prices, research and development efforts would be stifled and impede drug development [3]. With no federal regulation in place to deter price gouging of prescription drugs Senate Democrats recently introduced a plan- A Better Deal, offering solutions to lower drug prices and address the issue of price gouging. This plan suggests establishing a test for any unconscionable price increases with the imposition of fines and a demand for justification that would be made available to the public.

Generic drugs are heavily relied upon by many Americans. They offer an alternative to the higher cost of brand drugs. The FDA has determined generic drugs are ‘therapeutically equivalent to the brand drug in efficacy and composition [4]. Some policies and regulations determine how generic drugs will be developed and become available to the average consumer. Under the Biologics Price Competition and Innovation Act (BPCIA), there is a process for resolving patent disputes between applicants for generic drugs and brand manufactures. The Act defines the submission of an application as an ‘artificial’ act of infringement, thus facilitating the filing of patent infringement actions during the application process. An applicant for a biosimilar patent is required to demonstrate its safety and efficacy to the Food and Drug Administration (FDA). The FDA is encouraged to issue guidance documents to assist the applicant through the application process. A biosimilar is a product that can be substituted for a previously approved brand product and referred to as an interchangeable product. Once approved, the applicant receives a biological license.

As noted by Brookings, competition within the drug market transforms generic drugs into a low-margin commodity when multiple manufactures are producing the same drug. To encourage competition and innovation, BPCIA offers the incentive that the first applicant approved is granted one year of data exclusivity from the date of approval. This approval occurs after the manufacturer of the brand or “reference product” has already been granted a four-year period of exclusivity that precludes the FDA from reviewing any applications that are “highly similar” and twelve years of exclusivity from granting licenses that are “highly similar.”

In Sandoz, Inc. v. Amgen, Inc., the United States Supreme Court addressed the notice requirements of the Act. Under the Act, the applicant was required to notify the brand manufacturer before marketing an approved biosimilar to sell a product to the consumer. The notice requirements of 42 . § 262(l)(A) states: 

“an applicant seeking FDA approval of a biosimilar [needs to] provide its application and manufacturing information to the [brand manufacturer] within 20 days of the date the FDA notifies the applicant that it has accepted the application for review; and the applicant, under §262(l)(8)(A), must give the [brand manufacturer] notice of at least 180 days before commercially marketing the biosimilar…”

Sandoz, Inc. v. Amgen, Inc. addresses the issue of (1) “whether the requirement that an applicant provides its application and manufacturing information to the manufacturer of the biologic is enforceable by injunction and (2) whether the applicant must give notice to the manufacturer after, rather than before, obtaining a license from the FDA for its biosimilar[5].” The facts of the case are Amgen Inc., a manufacturer, has a biologics license for the brand product Neupogen®- a cancer treatment for white blood cell growth. In May of 2014, Sandoz Inc. filed an application to market a biosimilar of Neupogen and the FDA accepted their application for review; however, the applicant decided not to provide Amgen with its application nor manufacturing information as required by statute. Several months later, the biosimilar was approved by the FDA. The Supreme Court construed 42 . § 262(l)(2)(A) as not enforceable by injunction under federal law and that an applicant may provide notice as required by §262(l)(8)(A) before approval by the FDA. This case brings more substance to the notice requirements that could ultimately impede a manufacturer’s efforts to market a generic drug, negatively influencing their competitiveness in the market.

[1] Consumer Reports, 5/16/2017

[2] Frank, Richard G. (2004).  Prescription-Drug Prices.  The New England Journal of Medicine. 351: 1375-1377.

[3] Ibid.

[4]  Lieberman S., Darling M. and Ginsburg P.  (2017). A billion here, a billion there: Selectively disclosing actual generic drug prices would save real money. [blog] Brookings.  Available at:   [Accessed 12 Sep. 2017].

[5] Sandoz, Inc. v. Amgen, Inc., 582 U.S. (2017).