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Chip Davis, President and CEO, GPhA, Remarks on Generic Drug Competition and Drug Costs

Contact: Steve Arnoff 202.249.7113 

Statement (as prepared) of Chester “Chip” Davis, Jr. President and Chief Executive Officer, GPhA:
September 19, 2016

In our view, the recent focus and attention being paid to drug prices has the potential to bear positive results. Because the more we focus on this issue, the one thing most if not all seem to publicly agree on - from policymakers to the Federal Government to insurers, PBMs, and even the brand pharmaceutical industry - is that the solution to runaway brand drug prices is to enhance and increase true competition.

True competition is the key to providing affordable and accessible medicines to patients, while also constraining costs, which saves our health care system and the American people hundreds of billions of dollars each year. It is a value proposition not seen in any other segment of our health care system today. I say the focus has potential to bear positive results, because it is by no means guaranteed. Facts and sound economics are critical to pierce the rhetoric, and point policymakers in the right direction. Let me begin with a few essential and irrefutable data points:

• 88% of all prescriptions are generic drugs
• Yet these account for a mere 28% of the amount spent on prescriptions
• Generic drugs have saved our health care system approximately $1.68 trillion over the past decade with $254 billion in savings achieved in 2014 alone.

The Federal Government has confirmed the importance of generic savings multiple times just this year. In January, the Department of Health and Human Services (HHS) issued a report which stated, “Our review of evidence strongly supports the conclusion that generic drug prices are not an important part of the drug cost problem facing the nation.” The report also found that “about two-thirds of generic products appear to have experienced price declines in 2014.” Fast forward to last week when the Government Accountability Office (GAO) issued their own report which found prices for generic drugs in Medicare Part D fell 59% from the first quarter of 2010 to the second quarter of 2015. There’s still an opportunity to improve on all of these numbers, and that’s why at GPhA we’ve laid out the following polices and principles for Congress and other policymakers to consider:

• Promote timely access to quality affordable generic drugs that meet high standards of a streamlined development and approval process;
• Create polices that recognize the different economic dynamics of the brand and generic markets;
• Ensure an intellectual property framework that balances the need for innovation and robust generic competition;
• Stop certain brand drug companies from blocking or delaying generic drug development; and
• Increase utilization of affordable generics across all patient populations.

Each of these solutions is patient-centric and grounded in facts and sound economics. Independently and together, GPhA’s policy prescriptions will increase competition and enhance access to affordable prescription drugs, while adhering to the highest possible quality and safety standards. But in the midst of this critical opportunity to make progress on pricing and reducing costs, certain representatives for the brand and biologic industries are driving an agenda that would - if enacted - ultimately leave vulnerable patients without access to affordable medicines.

These industry representatives are saying one thing publicly about the need for competition, but advocating in Congress for something quite different. The policies they are advocating would actually increase barriers for generic entry, leading to less competition and increased costs to the system.

Here are just a few examples:

• Right now, some brand drug representatives are working on Capitol Hill to weaken and undermine legislation (S. 3056) that is being considered to curb anti-competitive abuses that are being used to delay generic drug development;

• Right now, certain brand drug and biologic interests are trying to thwart or inhibit the uptake of a vibrant biosimilar industry which has the tremendous promise of bringing competition to expensive biologics; and

• For some time now, brand pharmaceutical companies have pushed for an industry-wide exemption of a fair patent review process that Congress created on a bipartisan basis just five years ago (H.R.9), which allows challenges to weak patents that shield brand drugs from generic competition.

And while some interests are engaged in a campaign to try and place blame on generics for pricing problems, let me be clear: generic drugs and biosimilars are not the problem; they are a massive part of the solution.

Lastly, let me address one issue head on since it is being used to try and steer the decision-makers and the media in the wrong direction. A conversation about percent increases in a small minority of generic drugs distracts from the overarching reality that generic drugs experience deflation and save the American health care system $5 billion week.

We took careful note of the GAO report listing exceptions to the overarching phenomenon of generic price deflation and were determined to look more closely and understand price increases the report characterizes as “extraordinary.”

We found that among the products cited in the report for which data is publicly available, from 2013-2015; their average unit dollar increase was $0.65. The average unit price went from $1.62 in 2013 to $2.28 in 2015.

Moving forward we need to ensure that we do not chill the one, proven market that is performing for patients, payers, taxpayers and our government. Let’s enhance it by removing barriers to competition. And at the same time, let’s have a frank discussion about the sectors of the pharmaceutical ecosystem that account for the majority of patients’ costs. In 2014, specialty drugs accounted for 31.8% of spending on medicine for 1% of the population. There are estimates that percentage of spending will hit over 50% by 2018. If we truly want to consider solutions that are going to increase patient access and simultaneously constrain costs, this dynamic must be part of the conversation.

About GPhA 

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals, and suppliers of other goods and services to the generic industry. Generic pharmaceuticals fill 88 percent of the prescriptions dispensed in the U.S. but consume just 28 percent of the total drug spending. Additional information is available at gphaonline.org. Follow us on twitter: @gpha.