- Issue: Prescription drug prices have been climbing, creating significant barriers for patients. Since becoming U.S. Food and Drug Administration (FDA) Commissioner, Scott Gottlieb announced an action plan and several policy changes to increase generic drug competition and transparency to address high prescription drug prices.
- Goal: This issue brief aims to explain the FDA’s plan of action and assess its implementation to date. It also aims to assess whether FDA actions, if implemented, address the known problems leading to high drug pricing.
- Methods: We analyzed the FDA’s announced plans and actions as of March 31, 2018, and compared them to a comprehensive list of potential actions that could improve price competition among drug manufacturers included in our report, Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions.
- Findings: The FDA’s plan includes actions that could indirectly lower prescription drug prices through increased competition. The agency has made progress in implementing its proposed changes, but has not fully executed them. The FDA could use its broad authority over the approval of drug products to take additional actions that improve market competition. Congress also could take action to support the FDA’s efforts in increasing competition and addressing anticompetitive behaviors.
- Conclusion: Implementation of the FDA’s vision could create a more competitive drug market leading to more affordable drugs for patients. The FDA should consider additional steps under its current authority to address factors that impact competition and prices, while Congress should do more to support the FDA’s work to lower prescription drug prices by working with the FDA and other federal agencies.
Many brand-name prescription drugs are protected by patents or market exclusivity; some can take advantage of regulatory loopholes to delay price competition from generic drugs. As a result, brand-name manufacturers can continue to increase their prices without the threat of market competition. A recent study found that prices for brand-name drugs increased by 110 percent between 2012 and 2016, even though use of brand-name drugs decreased by 38 percent over the same time period.1 High prices can make certain drugs unattainable for consumers. In recent polling, four of five patients cited drug prices as a top priority for the administration and Congress.2
Our 2017 report, Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions, identified a lack of competition among generic drugs, resulting in less competition and higher prices, as well as anticompetitive behaviors used to delay price competition.3 This is inconsistent with the intent of the Drug Price Competition and Patent Term Restoration Act of 1984 — commonly referred to as the Hatch–Waxman Act, which created the pathway for generic drug approvals.
In the near future, President Trump is expected to make his first major announcement on drug pricing. So far, the administration has signed into law three drug-related provisions in the Bipartisan Budget Act of 2018 and made several proposals in the fiscal year 2019 Presidential Budget Request. However, the most significant administrative actions to date to address drug pricing have come from the FDA, which has announced a series of actions to increase generic price competition.
The FDA’s Role in Pharmaceutical Pricing
The FDA historically has not played a role in drug pricing policy because, as Commissioner Scott Gottlieb recently stated, it has “no legal authority to investigate or control the prices set by manufacturers, distributors, and retailers.”4 However, Gottlieb also publicly noted, “Too many patients are being priced out of the medicines they need. While the FDA doesn’t have a direct role in drug pricing, we can take steps to help address this problem by facilitating increased competition in the market for prescription drugs through the approval of lower-cost, generic medicines.”5 Under Gottlieb’s leadership, and in a relatively short period of time, the FDA set an ambitious agenda to encourage more transparency and generic drug competition and has outlined several other action steps to address gaming by some brand-name manufacturers to maintain monopoly pricing.6
This issue brief explains the FDA’s plan of action and its potential to lower prescription drug prices through increased competition by categorizing the types of actions the agency is taking and assessing whether they will address the known problems leading to high drug pricing.
Current, Proposed, and Future Actions to Lower Prescription Drug Prices
The FDA Has Made Progress Implementing Its Action Plans
FDA Commissioner Gottlieb released a proactive agenda to encourage more competition and transparency for generic drugs in June 2017, not long after he was sworn in in May.7 On subsequent occasions, he has announced steps to implement his vision, such as the Drug Competition Action Plan that outlines the FDA’s effort to increase generic drug competition and transparency.
As part of the Action Plan, Gottlieb held a public hearing in July 2017 to accept comments from the public on how to increase generic drug competition.8 Building on this plan, the FDA published a Strategic Roadmap in January 2018, which included further steps in areas like orphan drug approvals and compounding (Exhibit 1).
In his short tenure, Gottlieb has made significant strides by announcing his intent to implement actions that would indirectly address drug prices using FDA authority. Because these actions are in early stages or yet to be implemented, their impact remains uncertain. Gottlieb’s actions to encourage competition are expected to have a positive impact on bringing more generic drugs to market and providing lower-priced alternatives to patients. His comments on reducing anticompetitive behaviors, closing loopholes, and continuing to increase competition — including promoting biosimilar development — are promising indications that the FDA is taking the necessary actions to curb gaming by some manufacturers and spur price competition. If fully implemented, the FDA can address high prescription drug prices by creating a more competitive market; however, the agency can do more to lower prices.
FDA Actions to Promote Competition and Transparency
The FDA’s Broad Authority Allows It to Take Additional Actions that May Indirectly Lower Prescription Drug Prices
By leveraging its existing agency authority, the FDA can do more to encourage competition without congressional action (Exhibit 2). This would also indirectly affect high prescription drug pricing. For example, some of the highest-priced prescription drugs are biologics. Improving the biosimilar pathway by finalizing interchangeability guidance may have great future impact on price competition.
Much of the FDA’s authority for oversight of prescription drugs is rooted in approving drug product applications. The Secretary of the U.S. Department of Health and Human Services (HHS) has the authority to approve drug product applications in the Federal Food, Drug, and Cosmetic Act (FFDCA) (21 U.S. Code § 355(c)).26 The Secretary delegates its authority in the FFDCA to the FDA Commissioner, including reviewing and approving new prescription drug products.27