Drug Pricing Concerns Shape Policy Decisions

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Pharmaceutical Technology Europe

Pharmaceutical Technology Europe, Pharmaceutical Technology Europe-12-01-2003, Volume 15, Issue 12

This year has been one of tremendous activity at the US Food and Drug Administration (FDA) and other government agencies involved with health care, biomedical research and national security. Scientists completed sequencing the human genome, setting the stage for a period of important new medical therapy development. Efforts to protect the nation from biological warfare created pressures to produce new vaccines and medical treatments able to counter biological, chemical and radiological attacks (see sidebar "Combating bioterrorism").

This year has been one of tremendous activity at the US Food and Drug Administration (FDA) and other government agencies involved with health care, biomedical research and national security. Scientists completed sequencing the human genome, setting the stage for a period of important new medical therapy development. Efforts to protect the nation from biological warfare created pressures to produce new vaccines and medical treatments able to counter biological, chemical and radiological attacks (see sidebar "Combating bioterrorism").

The need to make prescription drugs more affordable for all Americans has shaped a wide range of policy initiatives. Leaders in Congress and the White House tackled the daunting task of crafting a prescription drug benefit for the nation's 40 million plus Medicare beneficiaries. FDA has taken steps to bring new generic drugs to market, while also struggling to stem public access to less expensive but unregulated medicines from abroad. The overarching goal is to make it easier for manufacturers to translate new biomedical discoveries into safe and effective treatments that will be more affordable for consumers.

Encouraging innovation

In his first year in office, FDA commissioner Mark McClellan tackled a host of thorny issues head-on. He unveiled a raft of initiatives designed to streamline FDA internal regulatory procedures, encourage innovation in pharmaceutical manufacturing and clarify requirements for testing new therapies (see sidebar "Consolidating drug oversight"). A prime goal has been to reverse the recent slowdown in new drug applications (NDAs) for important new treatments. FDA approved only 17 new molecular entities (NMEs) in 2002, a drop compared with previous years; the numbers are up so far this year, spurring hopes for further gains.

In January, the commissioner announced the Improving Innovation in Medical Technology plan, which aims to reduce the costs and delays in drug development by clarifying the regulatory standards and test data required by FDA to approve an NDA in only one review cycle.1 A key element of the scheme is "root cause analysis," designed to help manufacturers develop and submit sufficient test data in initial applications to reduce the need for lengthy and costly multicycle reviews of market applications. The agency is also writing more guidance documents to better define requirements for testing new treatments for diabetes, cancer and obesity - top priority disease areas for all government health agencies.

At the same time, FDA officials continued to implement a 2 year campaign to overhaul agency regulations governing good manufacturing practices (GMPs). Launched in August 2002, FDA unveiled several new initiatives in February (2003), followed by further announcements in September.2–4 The GMP update is revising policies governing electronic records and signatures; manufacturing plant inspection programmes; and post-approval manufacturing changes. It aims to encourage manufacturers to adopt new production technologies that can reduce manufacturing costs and better ensure product quality.

An overriding theme in McClellan's initiatives is to apply risk management methods to FDA policies and programmes, a concept that he explained further in FDA's Strategic Action Plan, issued in August (2003). Risk management involves targeting FDA's limited resources to best protect public health at the least cost. The agency wants to focus more oversight on higher risk products and processes, while also crafting policies that encourage voluntary compliance. Initiatives that reduce the time, cost and uncertainty of new drug development can improve public health, according to McClellan, by reducing the cost of medical product development and thus helping consumers access effective new treatments.


Ensuring safety

FDA seeks to apply risk management approaches to ensure the safe use of medical products by patients. In April, the agency held a 3 day workshop to examine ways of discovering and managing potential adverse drug events (ADEs). FDA officials, manufacturers and health professionals commented on agency proposals for testing new products more extensively before they reach the market to better identify and study possible safety problems. Participants also discussed how manufacturers could develop pharmacovigilance plans to detect and analyse safety issues that appear after a product reaches the market. FDA wants sponsors to do more to identify risk "signals" and to develop postmarketing risk management programmes for drugs that pose increased safety concerns for patients.

Another strategy for reducing potential medication errors is for manufacturers to print barcodes on drug packages, and even individual dosage forms, to ensure that the right patient receives the right dose at the right time. FDA issued a proposed rule in March requiring manufacturers to print barcodes on prescription drug packages.5 The rule compromises in calling only for national drug codes on packages, as opposed to more extensive data indicating lot number and expiration date.

FDA said it hoped to publish final rules on preapproval and postapproval drug safety policies, as well as barcoding requirements, by the end of the year. Meanwhile, the agency is linking up with broader health system databases that can help it identify ADEs more rapidly. FDA is also working with the National Library of Medicine to establish an electronic product label system for quickly distributing updated and comprehensive medication information to patients and health care providers.

Promoting generics

To further facilitate public access to more affordable medicines, FDA is streamlining its generic drug oversight process and promoting the quality and interchangeability of generics to encourage more prescribing. The agency has beefed up resources for its Office of Generic Drugs, has launched a consumer advertising campaign to promote the safety and equivalence of generics, and has backed legislative changes to clarify the rules governing patent listings and challenges. One aim is to reduce the endless litigation between innovator firms and generic competitors regarding patent violations.

A controversial issue is whether FDA has the authority to approve generic versions of biotech therapies, which appears open to interpretation under current law. In October, FDA issued a lengthy response to several citizens' petitions opposing approval of "follow-on" versions of brand-name therapies under the "paper NDA" process. A letter from the Center for Drug Evaluation and Research (CDER) claims that FDA may approve certain products based on published studies of the innovator drug as a way of bringing new therapies to market more quickly and without the need to duplicate research. At the same time, FDA fears that too much investment in "copy cat" products could divert industry resources from innovative research. The agency may begin a public process to gain more input from manufacturers, health care providers and consumer groups on how to balance these concerns.

Combating imports and counterfeits

Consumer efforts to obtain less expensive prescription drugs from Canada and other nations erupted this year into a contentious battle on Capitol Hill and in the media. Despite strong pressure from consumers and health insurers, McClellan insists that reimporting could bring unsafe and untested products into the US. FDA officials testified before Congress about the dangers of escalating drug purchases via Internet pharmacies, many of which operate overseas. Despite such opposition from FDA and the White House, the House approved a bill in July that permits reimporting of low-cost drugs from other countries - with no requirement that FDA first certifies that such activity will not harm consumers.6 Supporters of the measure aim to add it to legislation establishing a Medicare drug benefit.

The debate escalated in September when FDA asked the Department of Justice to file suit against a leading pharmacy website, Rx Depot, for arranging drug imports from Canada despite a March warning letter from FDA calling for the firm to cease and desist. FDA claimed that such imports "pose a serious threat to public health" because the agency cannot ensure the safety of these illegally imported medicines from unregulated sources. FDA's warnings appear to be falling on deaf ears as several states and local governments are devising plans to buy medicines from Canada to cut spending on drugs for Medicaid and local pharmacy benefit programmes.

The broader problem, according to FDA and manufacturers, is that illegal reimporting opens the door for counterfeit and unsafe products to enter the US market. FDA's counterfeit drug task force issued an interim report on 1 October that describes how counterfeit products slip into the US drug distribution system. To retaliate against the growing trend, the report proposes a mix of:

  • stricter licensing standards for wholesalers and distributors

  • technological innovations that manufacturers can incorporate into actual products or add to packaging to identify bogus as well as legitimate drugs

  • public education to help health professionals and consumers look for and identify counterfeits more readily.

FDA sponsored a well-attended meeting on 15 October to discuss these proposals and view anticounterfeiting technologies. Not surprisingly, manufacturers urged tighter controls on distributors, including requirements for maintaining detailed pedigree records that track drug origin and distribution; wholesalers, in turn, asked FDA to require manufacturers to include authentication devices and markers in drug products and packages.

The problem for manufacturers is that the public generally believes that drugs from Canada are just as safe and effective as those made in the US. A recent poll shows that consumers oppose efforts by the government and the US pharmaceutical industry to prevent them from obtaining less expensive foreign medicines, and that a growing number are purchasing them or would like to shop abroad for prescription drugs.

Intensified concerns regarding counterfeit drugs and illegal imports are focussing attention on the drug distribution system. One major wholesaler has been investigated for illegally diverting drugs to boost profits. FDA analysis identifies secondary wholesalers and repackagers as a common route of entry for counterfeit products. Florida has adopted a more stringent licensing and oversight policy for drug wholesalers, and other states are looking to follow suit. FDA is talking to Congress about revising a 1988 law that sets rules for tracking and documenting the source and movement of drugs through the distribution system. Manufacturers of products that appear attractive to counterfeiters are tightening up distribution by limiting sales to certain wholesalers or shipping directly to specific pharmacies. New electronic tracking systems may provide better ways to monitor and control the drug supply system.

Paying a fair share

One way to deter illegal and dangerous importing, according to McClellan, is to reduce the differences between US and foreign pharma prices. At a September colloquium on generic medicine in Cancun (Mexico), McClellan pointed to international pricing disparities for escalating the battle over whether US consumers may reimport less expensive medicines from Canada.

And because the US pays higher prices, McClellan commented, other nations do not shoulder a "fair share" of the cost of bringing new medicines to the world. Americans account for approximately half of all pharmaceutical spending worldwide, whereas Germany pays less than 5%, he noted, warning that such price controls abroad may "grind the global development of new drugs to a halt."

The commissioner's remedy is to relate drug prices to a nation's income, with rich nations paying more to support R&D so that developing nations can pay less. There's little chance, of course, that political leaders in Europe, Japan and Canada will agree to boost pharmaceutical prices - particularly when they are having trouble coping with escalating health care costs at home. But relating the reimporting problem to wide international differences in pharmaceutical prices gets at the heart of the issue and raises important questions about who will finance future biomedical R&D.


1. J. Wechsler, "Standards for Supplements," Pharm. Technol. Eur. 15(3), 18-20 (2003).

2. J. Wechsler, "Overhauling Compliance and GMPs," Pharm. Technol. Eur. 15(4), 19-22 (2003).

3. J. Wechsler, "GMP Update: Reducing Obstacles to Innovation," Pharm. Technol. Eur. 15(10), 21-25 (2003).

4. J. Wechsler, "FDA Seeks Risk-Based Inspection Programme," Pharm. Technol. Eur. 15(11), 18-21 (2003).

5. J. Wechsler, "Drug Safety in the Limelight," Pharm. Technol. Eur. 15(5), 19-22 (2003).

6. J. Wechsler, "Counterfeiting, Compliance and Controls," Pharm. Technol. Eur. 15(9), 21-25 (2003).