- 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.
Trump Administration Actions Related to Prescription Drug Policies
The President’s Budget and Drug Pricing Proposals
The President’s 2019 budget includes proposals to lower prescription drug costs. These build on last year’s limited efforts by the Centers for Medicare and Medicaid Services (CMS) to lower patient costs, by the U.S. Food and Drug Administration (FDA) to increase price competition, and by proposals put forth by the Obama administration in prior years. Some proposals would require legislative action from Congress to implement while others could be put in place by the administration without new statutory authority.
The President’s budget called for increased FDA funding and provided authority for it to eliminate the 180-day exclusivity for first-to-market generic manufacturers if they do not resolve application deficiencies in a timely manner. The majority of the proposals focus on policy changes or demonstrations in Medicaid and Medicare. To learn more on the proposals, read this Commonwealth Fund blog post.
Bipartisan Budget Act of 2018
The Bipartisan Budget Act of 2018 included three provisions to reduce prescription drug prices and costs. Likely the least understood part of that legislation is a technical fix to how the Medicaid program pays for “line extensions,” or drugs that have undergone minor changes from their original versions — sometimes referred to as “new formulation drugs.” In addition to the technical correction for line-extension drugs, Congress included two other provisions that save Medicare beneficiaries and the federal government money. The legislation builds on important work started in the Affordable Care Act to protect Medicare beneficiaries from high prescription drug costs. To learn more about these provisions, read this Commonwealth Fund blog post.
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
The FDA’s Authority Is Limited in Some Areas, But Congress Can Take Action
While the FDA has taken promising steps to address the lack of competition and improve its efficiency in approving prescription drugs, its authority has limits. Congress can support the FDA in addressing high prescription drug prices. This could include reaffirming authority for specific policy actions or establishing new authority to expand current FDA actions (Exhibit 3).
It is important to note that drug pricing problems extend beyond the FDA’s jurisdiction. Policy solutions that involve other agencies at the Department of Health and Human Services, the U.S. Patent and Trademark Office, Federal Trade Commission, and the Department of Justice must also be considered.
Commissioner Gottlieb has formed a meaningful plan of action that has the potential to create a more competitive prescription drug market and ultimately, more affordable drugs for patients. The agency should continue to move forward in implementing the Drug Competition Action Plan and the FDA’s 2018 policy priorities. Congress should work simultaneously to support and complement the FDA’s work to lower prescription drug prices and consider what can be done by other federal agencies.
1 Health Care Cost Institute, 2016 Health Care Cost and Utilization Report (HCCI, Jan. 2018), http://www.healthcostinstitute.org/report/2016-health-care-cost-utilization-report/.
2 Henry J. Kaiser Family Foundation, “Poll: Majorities of Democrats, Republicans and Independents Support Actions to Lower Drug Costs, Including Allowing Americans to Buy Drugs from Canada,” news release, May 1, 2017, https://www.kff.org/health-costs/press-release/poll-majorities-of-democrats-republicans-and-independents-support-actions-to-lower-drug-costs-including-allowing-americans-to-buy-drugs-from-canada/.
3 Henry Waxman et al., Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions (The Commonwealth Fund, July 2017), http://www.commonwealthfund.org/~/media/files/publications/fund-report/2017/jul/waxman_high_drug_prices_drivers_solutions_report.pdf.
4 U.S. Food and Drug Administration, “Frequently Asked Questions About CDER” (FDA, June 2017), https://www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/FAQsaboutCDER/default.htm#16.
5 Scott Gottlieb, “FDA Working to Lift Barriers to Generic Drug Competition,” FDA Voice (blog), U.S. Food and Drug Administration, June 21, 2017, https://blogs.fda.gov/fdavoice/index.php/2017/06/fda-working-to-lift-barriers-to-generic-drug-competition/.
6 U.S. Food and Drug Administration, “Statement from FDA Commissioner Scott Gottlieb, M.D., on New Steps to Facilitate Efficient Generic Drug Review to Enhance Competition, Promote Access and Lower Drug Prices,” news release, Jan. 3, 2018, https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm591184.htm.
7 U.S. Food and Drug Administration, “FDA Commissioner,” (FDA, last updated Apr. 24, 2018), https://www.fda.gov/AboutFDA/CommissionersPage/; and FDA, “FDA Tackles Drug Competition to Improve Patient Access,” news release, June 27, 2017, https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm564725.htm.
8 Gottlieb, “FDA Working to Lift Barriers,” 2017.
9 FDA, “FDA Tackles Drug Competition,” 2017; and U.S. Food and Drug Administration, “FDA in Brief: FDA Works to Encourage and Optimize Drug Competition with Transparency,” news release, Dec. 15, 2017, https://www.fda.gov/NewsEvents/Newsroom/FDAInBrief/ucm589275.htm.
10 Food and Drug Administration Reauthorization Act of 2017 (FDARA), Title VIII, Section 801.
11 U.S. Food and Drug Administration, Manual of Policies and Procedures, Center for Drug Evaluation and Research (FDA, Mar. 18, 2016; last updates Nov. 9, 2017), https://www.fda.gov/downloads/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/ManualofPoliciesProcedures/UCM407849.pdf; and Food and Drug Administration Reauthorization Act of 2017, Title VIII Amends FFDCA Section 505(j) to Prioritize Review of ANDA with Not More Than 3 Competitors and on the Drug Shortage List.
12 Scott Gottlieb, “Reducing the Hurdles for Complex Generic Drug Development,” FDA Voice (blog), U.S. Food and Drug Administration, Oct. 2, 2017, https://blogs.fda.gov/fdavoice/index.php/2017/10/reducing-the-hurdles-for-complex-generic-drug-development/.
13 FDA, “Statement from Gottlieb on New Steps,” 2018.
14 U.S. Food and Drug Administration, Healthy Innovation, Safer Families: FDA’s 2018 Strategic Policy Roadmap (FDA, Jan. 2018), https://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/Reports/UCM592001.pdf.
15 U.S. Food and Drug Administration, “Statement from FDA Commissioner Scott Gottlieb, M.D., Responding to Report from GAO and Updating on FDA’s Ongoing Efforts to Increase Access to Complex Generic Drugs,” news release, Jan. 16, 2018, https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm592629.htm.
16 U.S. Food and Drug Administration, “Statement from FDA Commissioner Scott Gottlieb, M.D., on New Steps to Improve FDA Review of Shared Risk Evaluation and Mitigation Strategies to Improve Generic Drug Access,” news release, Nov. 8, 2017, https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm584259.htm.
17 FDA, Healthy Innovation, Safer Families, 2018.
18 FDA, Healthy Innovation, Safer Families, 2018.
19 FDA, Healthy Innovation, Safer Families, 2018.
20 FDA, Healthy Innovation, Safer Families, 2018.
21 Scott Gottlieb and Leah Christi, “FDA Taking New Steps to Better Inform Physicians About Biosimilars Through Education About These Potentially Cost-Saving Options,” FDA Voice (blog), U.S. Food and Drug Administration, Oct. 23, 2017, https://blogs.fda.gov/fdavoice/index.php/2017/10/fda-taking-new-steps-to-better-inform-physicians-about-biosimilars-through-education-about-these-potentially-cost-saving-options/.
22 U.S. Food and Drug Administration, Clarification of Orphan Designation of Drugs and Biologics for Pediatric Subpopulations of Common Diseases; Draft Guidance for Industry; Availability (FDA, Dec. 2017), https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-27435.pdf.
23 Scott Gottlieb, “Taking New Steps to Meet the Challenges of Rare Diseases — FDA Marks the 11th Rare Disease Day,” FDA Voice (blog), U.S. Food and Drug Administration, Feb. 26, 2018, https://blogs.fda.gov/fdavoice/index.php/2018/02/taking-new-steps-to-meet-the-challenges-of-rare-diseases-fda-marks-the-11th-rare-disease-day/.
24 Gottlieb, “Taking New Steps,” 2018.
25 U.S. Food and Drug Administration, Compounded Drug Products That Are Essentially Copies of a Commercially Available Drug Product Under Section 503A of the Federal Food, Drug, and Cosmetic Act: Guidance for Industry (FDA, Jan. 2018), https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM510154.pdf; and U.S. Food and Drug Administration, Compounded Drug Products That Are Essentially Copies of Approved Drug Products Under Section 503B of the Federal Food, Drug, and Cosmetic Act: Guidance for Industry (FDA, Jan. 2018), https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM510153.pdf.
26 21 U.S. Code § 355(c).
27 U.S. Food and Drug Administration, FDA Staff Manual Guides, Volume II — Delegations of Authority (FDA, Aug. 26, 2016), https://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManualGuides/UCM273771.pdf.
28 U.S. Food and Drug Administration, “Remarks by Dr. Gottlieb at the FTC,” news release, Nov. 8, 2017, https://www.fda.gov/NewsEvents/Speeches/ucm584195.htm.
29 U.S. Food and Drug Administration, “Biosimilar Product Information” (FDA, last updated Mar. 28, 2018), https://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/ucm580432.htm.
30 Jacob F. Siegel and Irena Royzman, “US Biosimilar Approvals Soar in 2017,” Biologics Blog, Dec. 18, 2017, https://www.biologicsblog.com/us-biosimilar-approvals-soar-in-2017.
31 Siegel and Royzman, “US Biosimilar Approvals,” 2017.
32 Waxman et al., Getting to the Root, 2017.
33 U.S. Food and Drug Administration, Considerations in Demonstrating Interchangeability with a Reference Product: Guidance for Industry (draft guidance) (FDA, Jan. 2017), https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM537135.pdf.
34 Gottlieb and Christi, “FDA Taking New Steps,” 2017.
35 FDA, Healthy Innovation, Safer Families, 2018.
36 FDARA, Title VIII, Sec. 801.