INSIDER INSIGHT
increasingly tight requirements and regulations. Yet the companies seeking to provide a more cost-effective alternative for life-saving treatments are required to meet different requirements, lower levels of impurities, strin- gent manufacturing processes, inspections and controls as compared to when the innovator product was approved. Luckily for Mylan, once it se- cured approval in the 1970s, during a time of less stringent requirements, that approval was essentially for life.
Another example of how an over-regulated industry is affecting market competition is the situation with many small-volume, high-value drug products. There are numerous industry examples in which one company has a stronghold over the entire market for a product that received FDA approval many years ago. While other players can develop a generic and seek approvals, the total market is too small to justify the costs to comply with the latest and ever-growing FDA requirements. The economics don’t make sense until the company that has the approval raises the price so high that all of a sudden a market exists. They can then enjoy the high profits (while patients suffer) until another approval comes along, if it ever does. Often, the cost to complete new rounds of testing, secure additional raw materials and provide the resources to complete the extensive paperwork for all the various filings would surpass the return on investment or would not justify the business risk. Ironically, in many cases the existing product
currently on the market and approved years ago would never meet the standards that the generic must meet today.
It’s clear that the costs of drugs – generics and blockbusters alike – will rise and fall based on the competitive climate. Many a brand-name drug manufacturer has gone from being a $1.5B franchise to a $60M one overnight because several new generics have been approved for use and commercialized. While this may not be good news for the blockbuster drugs, it’s great for a free market, as well as patients who rely on these drugs to survive.
An over-regulated industry is not the only reason for soaring drug costs –there are clearly additional factors, such as a shortage of raw materials and manufacturing issues that can always arise to drive up costs. Even if the FDA opened up the barriers to entry for generics, consolidation in the industry could occur from this host of new players. Also, as patents expire, the generic drug market could have fewer players competing for sales and once again costs could climb.
As situations like the EpiPen have demonstrated, we have to work to ease some of the restrictions to the approval of generic and alternative drugs to ensure that no one brand gains a monopoly. Not only does such a monopoly impact the health and safety of consumers who may not be able to afford the rising costs, it impedes the innovation that is created from healthy competition.
pharmoutsourcing.com | 11 | November/December 2016
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