A Drug Cartel at the FDA A new rule will produce a lawsuit rush and raise prices for generics.
http://www.wsj.com/articles/a-drug-cartel-at-the-fda-1474931423
The anaphylactic political shock over EpiPen prices continues, and last week a House committee dragged in the company CEO. But some outrage should land on the Food and Drug Administration, which won’t approve a generic stinger that would end Mylan’s monopoly power. Instead, the agency is finishing regulation that will restrict competition precisely as patients are demanding cheaper medicines.
The FDA will next year complete a new rule on labeling generic drugs, which are chemically no different from brand-name versions but sell at an average 80% discount. One reason generics are so much cheaper is that the drugs are approved under an expedited FDA process and bear identical labels to branded equivalents—side effects and so on. The FDA would allow generic producers to alter their own labels to include “up-to-date” safety risks, as the agency puts it.
That sounds innocuous, but here’s the fine print: Generic producers would be exposed to a crush of new lawsuits. The Supreme Court ruled in 2011 that generic drug makers are shielded from torts that accuse a company of failing to warn consumers of risks. The reason for the dispensation is that generic producers are not at liberty to tweak their labels. The FDA’s rule would skirt that precedent, and the law: The 1984 Hatch-Waxman Act requires branded and generic drugs to be identical “in all respects—including labeling,” to borrow from a 2014 letter from Congress to the FDA.
Unleashing the trial lawyers would increase generics spending by $5.6 billion in 2017, and the figure reaches $8.6 billion in 2024, according to a report by Alex Brill of Matrix Global Advisors. Consumers will pay for legal fees and settlements through higher drug prices. Small companies may not be able to absorb the expense. Even large firms will suffer because he industry sells its generic products near marginal cost. The result is likely to be less of the competition that drives down prices: A patient pays a mere 20% of the brand-name cost when eight generic firms are battling for market share, an FDA analysis found.
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