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GPhA Urges Senate to Stop Abuse of Restricted Distribution Agreements

Contact: Steve Arnoff 202.249.7113

WASHINGTON, DC (March 17, 2016) —
Statement by Chip Davis, President and CEO, GPhA:

“The Generic Pharmaceutical Association (GPhA) is pleased that the Senate Aging Committee, led by Chair Susan Collins and Ranking Member Claire McCaskill, is bringing much needed attention to the anti-competitive business practices increasingly deployed by certain brand manufacturers to stifle generic competition. As costs associated with the use of branded specialty medicines continue to rise, public analysis and review of business practices designed explicitly to restrict generic competition are more important than ever.

It is equally important to understand the difference between what the Committee discussed today —self-imposed restricted distribution agreements utilized by select companies to thwart generic entry —and those mandated by the Food and Drug Administration (FDA) to protect public health and safety. While GPhA recognizes there are abuses in FDA mandated Risk Evaluation and Mitigation Strategies (REMS) programs, we are pleased that the committee paid needed attention to the abuse of voluntary restricted distribution agreements by certain companies.

FDA-mandated REMS programs can, and do, serve a compelling public good. However the misuse of restricted distribution agreements, intended to deny generic and biosimilar manufacturers’ access to product samples needed to conduct bioequivalence studies that are required for FDA approval, only serves to extend market monopolies at the expense of patients. As Matrix Global Advisors notes, this practice is costing the overall healthcare system billions of dollars a year.

Today’s hearing comes at a time when an increasing number of healthcare stakeholders, from the government to the largest pharmacy benefit manager, and one of the largest consumer advocacy organizations, publicly recognize the value and savings associated with access to safe, effective and affordable generic drugs:

• A Department of Health and Human Services (HHS) issue brief states, ‘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. In fact, about two-thirds of generic products appear to have experienced price declines in 2014.’

• The new Express Scripts Drug Trend Report notes from January 2008 through December 2014, a market basket of the most commonly used brand medications increased in price by 127.4%. During that same period a market basket of the most commonly used generic medications decreased in price by 62.9%.

• Research by AARP identifies brand and specialty drugs as the key drivers of rising drug costs while noting that generic prices continue to decline. In highlighting the high annual cost of medicines, AARP notes that ‘these findings are entirely attributable to strong drug price growth among brand name and specialty drugs, which more than offset substantial price decreases among generic drugs.’

• Thirty of the 50 most common generics declined in price from January to December 2015, according to the website GoodRx.

Even with this demonstrable level of savings, there is even more that can be achieved. GPhA supports the following policies which Congress could consider that would increase pharmaceutical competition and the level of savings provided by generic utilization:

• Ensure a fully-resourced Food and Drug Administration (FDA) can address the backlog of more than 3,400 generic drug applications stalled while waiting for approval and shorten FDA median generic drug approval timelines, which, at the industry’s best estimate, currently stand at 48 months.

• Increase generic utilization among the low-income Medicare population, which could save up to $17.7 billion over 10 years.

• Pass the bipartisan FAST Generics Act to curb some brand drug company abuses of FDA safety programs such as Risk Evaluation and Mitigation Strategies (REMS) used to keep generics off the market, an estimated savings of $2.4 billion over 10 years.

• Work closely with industry and regulatory partners to ensure that the framework for biosimilars, safe and effective alternatives to costly brand biologic drugs, expands and expedites patient access. Estimated savings from biosimilars ranges from $44 billion to $250 billion.

• Repeal Sec. 602 of the Bipartisan Budget Act of 2015. The Medicaid rebate increase for generic drugs in the budget deal is bad for Medicaid and its beneficiaries, bad for taxpayers, and it should be immediately repealed.

GPhA and its member companies support efforts to ensure more Americans have access to safe, effective and affordable medicines. GPhA applauds Sens. Collins and McCaskill, as well as Reps. Kurt Schrader and Gus Bilirakis for introducing legislation that recognizes generic drugs drive savings, not costs. The “Competition in Pharmaceuticals Act” as well as the “Lower Drug Costs through Competition Act’’ both take important steps toward encouraging competition and enhancing patient access. We look forward to working with Sens. Collins and McCaskill and Reps. Schrader and Bilirakis to ensure that generic drugs can continue to expand access and drive savings for millions of Americans.”

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 Follow us on twitter: @gpha.