As Representatives and Senators return to Washington for the last few weeks of fevered legislating before government funding runs out on December 20, stakeholders across the political spectrum are watching to see what non-spending items get tacked on to whatever legislation keeps the government open through the holidays and beyond.
Lots of attention is focused on surprise billing, Speaker Pelosi’s prescription drug legislation, the U.S.-Mexico-Canada (USMCA) trade agreement, and other big-ticket items. There are less flashy items up for consideration, though, that present risks for taxpayers and consumers alike.
One is a relatively obscure provision of a large bill, the Lower Health Care Costs Act (S. 1895), that could be attached to a year-end must-pass government spending bill. S. 1895, which passed out of the Senate Health, Education, Labor, and Pensions (HELP) Committee in July, addresses a wide variety of health policy challenges, including surprise billing and pharmaceutical pricing. NTU has praised portions of the legislation and criticized others.
The obscure provision, Section 205, closely models a bill, the BLOCKING Act of 2019 (H.R. 938), that passed the House Energy and Commerce Committee in May. Both Section 205 and the BLOCKING Act would make changes to the six-month marketing exclusivity period a drug manufacturer currently enjoys if they are the first to challenge a brand drug’s patent and file a generic drug application under a so-called paragraph IV certification. The six-month exclusivity period provides the generic manufacturer a “strong financial incentive” to challenge a brand drug’s patent which, if successful, introduces more competition to a particular drug’s market. The incentive appears to work, since the FDA has received hundreds of paragraph IV certifications as of November 2019.
Section 205 and the BLOCKING Act would start the six-month clock on a first-to-file generic manufacturer’s exclusivity period if 33 months (under Section 205) or 30 months (under the BLOCKING Act) have passed since the date that a generic manufacturer submitted their application to the FDA for approval.
The intent of the legislation is to prevent a small number of manufacturers from intentionally delaying final FDA approval, ‘parking’ their first-to-file applications and preventing subsequent generic manufacturers from entering the market. The House Energy and Commerce Committee reported that the FDA claims this happens “an average of five times each year, and each time delays competition an average of twelve months.”
While generic ‘parking’ is a legitimate policy concern, either Section 205 or the BLOCKING Act would also punish many generic manufacturers who are simply caught up in a lengthy FDA approval process for their first-to-file applications. In 2017, the median FDA review time for generic drug applications was 37.26 months - seven months longer than the BLOCKING Act’s trigger date and four months longer than Section 205’s trigger date. Of course, 37.26 months is just the median review time - by definition, half of all applications took longer than 37.26 months in 2017.
This legislation, in either form, could lead many generic manufacturers seeking approval through a paragraph IV certification to lose their marketing exclusivity before they ever receive final approval for their drug. This destroys the financial incentive for generic manufacturers to make the paragraph IV certification, and could in turn chill generic competition for expensive brand-name drugs.
Patients and taxpayers lose out as a result:
One study cited by the FDA found that “generic drugs saved the U.S. healthcare system $1.67 trillion from 2007 to 2016.” In 2018, the Department of Health and Human Services (HHS) reported that in 2017 “90% of retail prescriptions filled in the US were for generic drugs.”
Within Part D, Medicare’s prescription drug benefit, 86 percent of prescriptions in 2016 were for generics, up from 61 percent in 2007. HHS estimated that if Part D had paid for generics instead of brand name drugs whenever “therapeutically equivalent generics” were available, the program (and the taxpayers that support it) would have saved $3 billion in 2016 alone.
It certainly does not seem like lawmakers’ intent to crush the incentive for generic manufacturers to challenge brand-name patents. In fact, from Hatch-Waxman in the 1980s to the more recent amendments to the 180-day exclusivity period passed in the Food and Drug Administration Safety and Innovation Act of 2012, Congress has regularly showed an interest in giving generic manufacturers the space, time, and incentives needed to compete with brand-name drugs.
That is why it’s crucial Congress avoid jamming Section 205 of the Lower Health Care Costs Act or the BLOCKING Act into year-end legislation. While lawmakers and their staff are understandably busy with some of the big-ticket items like surprise billing and USMCA, this quiet but damaging provision could completely change the landscape of generic drug competition for the worse. And less generic drug competition means higher costs for both patients and taxpayers.