Can the FDA Help Reduce Drug Prices or the Cost of Medical Care?

The new US Food and Drug Administration (FDA) commissioner Scott Gottlieb has worked for pharmaceutical companies for most of his career, so it may have surprised some public health advocates when he responded to congressional pressure by taking on the hot issue of drug pricing as one of his first priorities.

In his blog written for the FDA Web site, Commissioner Gottlieb echoes the view of many public health advocates when he says:

Too many patients are being priced out of the medicines they need. While 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. (bit.ly/2sqamP7)

“We’re working on a Drug Competition Action Plan,” he explained, and although there are no details yet, he states that a major strategy is for the FDA to approve safe and effective generic medicines more quickly, even if that requires preventing brand-name pharmaceutical companies from “gaming the system.” He gave examples of companies preventing generic drug companies from gaining access to sufficient doses of brand-name drugs that they need for testing as well as various other legal maneuvers that are used to delay generic drugs from obtaining FDA approval.

I agree with Commissioner Gottlieb that these sound like useful strategies, because generic drugs have been estimated to have saved $1.2 trillion between 2003 and 2012.¹ However, I question how much these strategies can accomplish. Is this a Band-Aid approach to a much more complex problem—and if so, is the FDA part of the problem?

GENERIC DRUGS, COMPETITION, AND DRUG PRICES

The Government Accountability Office (GAO) reported in 2016 that the price of 50-milligram capsules of the antidepressant clomipramine HCL, which is used to treat obsessive–compulsive disorder, increased by more than 2000% in one year: from 34 cents per capsule in 2013 to $8.43 per capsule in 2014.² The 20-milligram capsules of piroxicam, to treat arthritis, increased by more than 2000% from 2010 to 2015: from 9 cents to $1.82 per capsule. The price of digoxin, a commonly prescribed heart medication, increased by 2800% in a single year (bit.ly/2fF7kCQ).

Despite these increases, the GAO found that from 2010 to 2015 the cost of generics decreased by 59%. Nevertheless, the GAO reported that the price of 315 generic drugs went up by 100% or more during those years, causing financial difficulty for many patients.

Pharmaceutical companies told the GAO that competition is key. When a company introduces a new generic drug into the market, it typically offers it at a lower price than does the competition, and other firms respond by cutting their prices. When a large number of generic manufacturers are making the same product, the average price usually falls to 20% of the branded price, or even lower. There are exceptions, however. For example, eight companies make ursodiol, a treatment for gallstones. In 2013, the cost was 45 cents per capsule, but in May 2014, Lannett increased its price to $5.10 per capsule, and its competitors soon followed.²

Nevertheless, a study of more than a billion prescription drug claims from commercial health plans between 2008 and 2013 found that, after statistically controlling for other factors, the price of a generic drug in the highest marketing competition group was likely to decrease 32%, whereas the price of a generic drug in the lowest market competition was likely to increase 47% (bit.ly/2fF7kCQ).

IS THE FDA PART OF THE PROBLEM?

The contribution of the FDA to high drug prices was noted recently when the FDA approved an old, commonly used drug for a type of Duchenne muscular dystrophy. Deflazacort had not previously been approved in the United States, but many patients imported generic versions from Europe or Canada for $1000 to $2000 for a year’s supply. When the FDA approved it, a US company gave it a new name, Emflaza, and a new price tag, $89 000 per year (more than a 6000% increase).³

Another glaring example of the unpredictable impact of competition involved brand-name drugs for hepatitis C. When Gilead put Sovaldi on the market in late 2013, it cost $1000 per pill: $84 000 for a 12-week course of treatment. The public and policymakers were incensed at what was considered an outrageous cost, but experts assumed the price would soon drop because other similar drugs were in the pipeline. Instead, the official price increased, despite two competing drugs, one of which (Harvoni) is also made by Gilead and priced at $94 500 per 12-week regimen.⁴ Meanwhile, Sovaldi costs $55 000 in Canada and only $900 in Egypt.

FDA DRUG APPROVAL

Clearly, when the FDA approves new drugs that create competition, it does not necessarily lower prices. Congress has passed laws to require the FDA to approve drugs and devices more quickly, which Commissioner Gottlieb also supports. This has resulted in lower standards over the last two decades⁵ and has contributed to the high cost of medical care, a problem unique to the United States. In countries with national health plans, cost-effectiveness often determines whether there will be reimbursement. By contrast, Medicare, the Veterans Administration, and insurance companies tend to rely on the FDA’s seal of approval to determine which drugs they will pay for. The FDA may approve drugs that are inferior to others already on the market as long as the benefits of the new drug outweigh the risks compared with placebo. Because the United States is one of only two countries in the world that allows direct-to-consumer advertising, more expensive drugs are frequently prescribed even when they are less safe or less effective than other treatments on the market.

The FDA standard for drug approval used to require two well-controlled clinical trials proving a meaningful clinical benefit, but most new drugs are now approved through expedited pathways that often require only one study and use surrogate endpoints (such as bone mineral density), rather than living longer or fewer serious symptoms. Most new cancer drugs, for example, are approved on the basis of short-term data indicating smaller tumors—staying on the market even when subsequent studies show no improvement in survival or quality of life.⁶

Only 8% of new drugs or new indications approved from 2002 to 2011 offered therapeutic advantages,⁷ substantially fewer than the previous two decades. Nearly twice as many (15.6%) were more harmful than beneficial, and only 1.6% offered substantial advantages. And yet, sales and profits increased dramatically because of successful marketing. Studies show that approximately 80% of the increase in drug expenditures paid for “me-too” drugs, defined as new drugs with very minor differences from those already on the market, not for important advances.

Even more worrisome are evidence-challenged FDA approval decisions that resulted in drugs costing $300 000 to $750 000 per year. Eteplirsen (Exondys 51) was approved in 2016 despite FDA scientists’ conclusions that the uncontrolled study of only 12 patients did not prove effectiveness. The drug costs $300 000 per patient per year, although at best it delays, but does not cure, a type of Duchenne muscular dystrophy. Despite the previous FDA commissioner’s promise that this would not set a precedent, in December 2016 the FDA approved Spinraza for infants, children, and adults with spinal muscular atrophy, although the drug was studied only on infants and young children—not adolescents or adults. Spinraza costs $750 000 per patient.

Because these treatments are for devastating rare diseases, they have attracted less attention than $600 EpiPens, for example. However, the cost of Exondys 51 could be considerable because it is not a cure; patients plan to take it for the rest of their lives.

Several major insurance companies broke with tradition and refused to pay for either drug unless a benefit was proven (such as Spinraza for infants). However, the precedent the FDA set by approving products for unproven treatments, and the astronomical price established by the companies, are putting the United States on a path to unsustainable medical costs.

PRICE PER PILL VS PRICE FOR A CURE

The math is simple: generic drugs often save money per pill but overall medical costs will continue to increase as the FDA approves treatments that are not proven to work, are inferior to less expensive treatments, or cause complications that are expensive to treat—and as companies charge whatever the market will bear.