Efforts to lower drug prices have led to a steady increase in FDA approvals of abbreviated new drug applications (ANDAs), including first-time generics. With 73 approvals currently, and a projected 109 by the end of the year, the number of first-time generic approvals has risen 49% since 2016. When looking at approvals of all abbreviated new drug applications, including tentative approvals, the FDA has given its seal to nearly 28% more than it did three years ago.
"This is clearly part of the overall Trump administration's drug pricing plan," said Bethany Hills, an FDA and life sciences attorney and partner with New York-based Morrison & Foerster. "It's not very sexy, the idea of increasing the availability of generics, but it does seem to be the easiest to accomplish through the existing regulatory framework. And it does seem to be the one drug pricing component in the matrix, in the puzzle, that has an economic model behind it that makes sense." (See First-time generic approvals and ANDA approvals by FDA, right.)
Since President Trump's initial announcement that his administration would work to reduce the price of drugs, the FDA released a plan to increase generic competition and provided better guidance about what a generic application should contain. Other efforts considered to reduce drug costs include importation and an international pricing index or a favored nations law to equalize the prices U.S. consumers pay.
"Based on our feedback we see the policy reforms that are most likely to gain enough support to pass as being moderate changes," said Brian Abrahams, an analyst with RBC Capital Markets LLC, in a research note, "including policies to improve approval processes for biosimilars/generics, pay-for-delay reforms, and changes to (Medicare's) Part D reimbursement structure."
Hills noted a significant amount of government work being done in terms of "enforcing the competition laws and trying to minimize the pay-for-delay situation or other activities that could be used to minimize the generic entry on the market."
Receiving first-time generic approvals this year include generic versions of three high-priced pulmonary arterial hypertension (PAH) drugs, Tracleer (bosentan, Actelion Pharmaceuticals Ltd., unit of Johnson & Johnson), Letairis (ambrisentan, Gilead Sciences Inc.) and Revatio (sildenafil, Pfizer Inc.). The PAH generic approvals account for 18% of all first-time approvals so far in 2019.
According to the National Center for Biotechnology Information (NCBI), a unit of the U.S. National Library of Medicine located in Bethesda, Md., the average annual drug costs of endothelin receptor antagonists (ERAs) for PAH, such as Tracleer, ranged from $44,000 to $47,000. NCBI also indicated PDE-5 inhibitors ranged from $9,755 for Adcirca (tadalafil, United Therapeutics Corp.) to $12,178 for Revatio per year. Generic drugs are typically offered for at least a 30% discount from the brand price, but an approval does not necessarily mean the door has swung wide open for marketing the product. Generic companies often need to wait for expirations to patents and exclusivity periods.
Generics of another well-known biopharma drug, Lyrica (pregabalin, Pfizer Inc.), received FDA approval within the last month. Lyrica, a pain drug, was the subject of comments by Sen. Ron Wyden (D-Ore.) who lambasted New York-based Pfizer in a February U.S. Senate Committee on Finance hearing focused on drug prices.
"Lyrica has increased 163% in price since 2012. Just one drug allowed Pfizer to pull in $4.5 billion in 2017," he said.
At the same hearing, Pfizer CEO Albert Bourla referred to the "horribly misaligned incentives within our health care system" as the culprit to rising drug prices, noting that none of Pfizer's $12 billion in rebates in 2018 found their way to American patients, but were swallowed up by supply tanks.
Bourla also suggested value-based payments and knocking down barriers to lower-cost biosimilars as a way to control drug prices.
"Adverse incentives that favor higher-cost biologics are keeping biosimilars from reaching patients," he said. "In many cases, insurance companies decline to include lower-cost biosimilars in their formularies because they would risk losing the rebates from covering higher cost medicines."
Since the first approval of a biosimilar in 2015, the FDA has approved two additional biosimilars per year, reaching seven in 2018. So far, in 2019, there have also been seven, with four months to go, for 23 total approved biosimilars in the U.S. (See Biosimilars approvals by FDA, right.)
Hills agreed that formularies have prevented easy market access for generics due to a "huge lag time" of up to a year-and-a-half of formulary development.
"As those formularies are developed," she said, "instead of a pure brand-to-generic swap, you see a lot of tiering."
ANDA approvals have risen from 813 in 2016 to a projected 1,046 this year, including all tentative approvals. The eventual impact of the increasing approvals may be seen through patient co-pays, as opposed to reducing list prices, Hills said.
But there are ways the biopharma industry may consider responding to the trends toward more generic approvals.
"Increased competition may mean less market share or may mean less preferential pricing," Hills said, but precision medicine, or showing "that your branded drug works with a diagnostic that looks at related biomarkers or that can use genetic information about a person," may be one way to leverage the concept of value-based pricing.