Soul Searching on Sole Sourcing

  • by: Peter Pitts |
  • 03/16/2016
National Public Radio’s Marketplace program reports:

The Food and Drug Administration recently said it’s going to prioritize any generic drug application when there’s currently just one manufacturer.

Here’s why:

At the University of Utah Healthcare, pharmacist Erin Fox said in about a year, the heart medication Isuprel went from $50 a dose to $1800 after Valeant purchased the drug.

She said they had always stocked on crash carts.

“Basically, it’s the kind of [drug] you might see on TV, code blue, cardiac arrest, everyone is rushing around,” she said. It’s the kind of medication that can save a life, she said.

But at $1800 a dose, it got pulled off the carts, only to be used in extreme emergencies.

This is what happens when a company has a lock on a given drug.

Some estimate there are 500 generic drugs – for everything from cancer, to multiple sclerosis to heart disease – that currently have virtual monopolies. And companies like Valeant and Turing have taken advantage.

“This is a good circumstance of the FDA actually getting out in front of a problem before it becomes serious,” said Peter Pitts, a former associate FDA Commissioner. “I think this is a program that’s going to have significant impact.”

Pitts said cutting the application process from 2-3 years to as short as six months will help clamp down on some of the price gouging. The FDA says it has 125 current submissions for drug approvals that will be expedited. 

Former industry CEO George Zorich wondered if that’s enough of an incentive.

“If I’m a manufacturer, I’m hard pressed just to drop everything without some discussion from the FDA and some real frank discussions with the [FDA],"  he said.

Some major generic manufacturers – and the industry trade group - declined interview requests. In statements, several simply said competition is important.

Perhaps an indication that speeding up the FDA process is just one step needed to drive more competition.

The NPR story can be heard here.

My conversation with the reporter also included the issues related with inadequate CMS reimbursement policies as a cause for single source products – but it didn’t make it into the brief radio report.

We need to focus on the perverse economic incentives of Average Sales Price (ASP) as a key factor behind the problem.

We need legislation to deal with:

* Price Stability — Change the Medicare reimbursement rate for generic injectable products with 4 or fewer active manufacturers from Average Sales Price (ASP) + 6% to Wholesale Acquisition Cost (WAC) in order to achieve market price stability.

* Medicaid/340B Rebate Exemption — Exempt generic injectable products with 4 or fewer active manufacturers from Medicaid rebates and 340B discounts in order to achieve market price stability.

The FDA has done its part. Now it’s time for Congress to step up to the plate.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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