Drug Pricing’s Static Changes

Prescription drug patent exclusivity was extended during Hatch-Waxman Act’s convoluted negotiations to increase generic drug access and overall drug affordability. Later, around 2009, part of the prescription price increase allowance and extension argument for biologics was based on what was termed a “looming patent cliff.” Patent protection is now 20 years from date of filing in the United States, but market exclusivity appears to average a little over 13 years in practice (1). Following Hatch–Waxman, the generic products’ share of total prescriptions in the US increased from 36% in 1994 to 90% in 2019 (1). Loss of income due to lower pricing of generics estimated at $185 billion was evenly balanced by price hikes for prescription drugs of $187 billion (2). This helped create the conditions we face today where once again there is a prescription drug price crisis because 10% of prescriptions have an average cost of $20 a day and account for 80% of all prescription drug spending, despite the fact that (largely due to Hatch-Waxman) 90% of prescriptions are generics that cost on average, $1 a day (2).

To revisit the cost issue, President Biden signed the Inflation Reduction Act (IRA), while pharmaceuticals reportedly face, once again, a looming patent cliff (3). With regard to IRA, biopharma executives describe the Medicare drug price negotiation process “as basically enforced price fixing on certain established medicines and that it will affect how companies allocate capital and force hard decisions on investments in the very costly process of drug testing and production” (4).

However, at the 2023 BIO conference in Boston, FDA Commissioner Robert Califf stated that drug prices are too high, and that “FDA officials are providing technical assistance to their counterparts at the federal Centers for Medicare & Medicaid Services as they prepare to negotiate drug prices with companies for the first time” (5). On limiting reimbursements for accelerated clinical trials, Califf went on to say, “‘sounds like common sense to me’ for government health insurers to pay less for drugs that haven’t yet been fully approved. ‘If I had a basketball that’s probably going to stay inflated and it looks pretty good in the store but we don’t really know, you wouldn’t really pay the same as you would for a first-rate basketball’ guaranteed to stay firm” (5).

References

1. Grabowski, H.; Long, G.; Mortimer, R.; and Bilginsoy, M. Continuing Trends in U.S. Brand-name and Generic Drug Competition. Journal of Medical Economics. August 2021. Taylor and Francis online.

2. Engelberg, A. Unaffordable Prescription Drugs: The Real Legacy of the Hatch-Waxman Act, STAT News. December 2020.

3. Hennessy, M. Major League Moves. Pharm. Technol. 2022 46 (4).

4. Wechsler, J. Biden Hits Drug Prices for Boosting Health Care Costs. PharmTech.com. Feb. 9, 2023.

5. Weisman, R. FDA Chief’s Unwelcome Message to Biotech Execs: Prices of Drugs Are Too High. The Boston Globe, June 7, 2023.

About the author

Mike Hennessy Jr. is the President and CEO of MJH Life Sciences.

Article details

Pharmaceutical Technology
Vol. 47, No. 7
July 2023
Page: 8

Citation

When referring to this article, please cite it as Hennessy, M. Drug Pricing’s Static Changes. Pharmaceutical Technology 2023 47 (7).