September 19, 2013

FDA rule change is a prescription for mega lawsuits

Generic consumer products first appeared on store shelves in the late 1970s as a cost-conscious alternative to brand name grocery products. Today, one can buy practically anything in generic form – from tires to whiskey.

But perhaps no generic product has had a greater impact on consumer costs like generic drugs have on the nation’s medical bill. Affordable generic drugs have kept medicines within reach of millions even as overall health costs spiral upward.  Today, almost 8 in 10 prescriptions nationally are filled with generics, and that number will only grow as more drugs become available in generic forms.

So it is mind-boggling that, on the cusp of a major federal expansion of healthcare where one agency (Health and Human Services) is looking everywhere for health cost savings, another agency (the Food and Drug Administration) is considering a change that could drive up the cost of generic drugs, perhaps by billions of dollars.

The change: FDA is considering abandoning its requirement that generic drugs carry warning labels identical to those on name brand equivalents.

The result? Market confusion – and lots of lawsuits. And, ultimately, health care cost increases.

So perhaps it isn’t that mind-boggling when one considers that the biggest proponents of this change are trial lawyers, not doctors or pharmacists.

Generic drugs are possible thanks in large measure to the 1984 Hatch-Waxman Act, which ensures generic drugs’ safety and affordability by requiring generic manufacturers to duplicate the effectiveness and labels of FDA-approved brand name drugs.  Congress’ “sameness” requirement allows generic drugs to come to market without duplicating costly research and monitoring systems.

Hatch-Waxman did not simply reduce development costs for generics. It also ensured that generic products would be freely substitutable with brand-name drugs.  By cutting costs and allowing substitution, Congress created a system that lowers prescription drug costs for consumers.

For nearly thirty years, the FDA has interpreted Hatch-Waxman to prohibit generic drug manufacturers from using labels different from the name brand equivalent. The U.S. Supreme Court affirmed this in two recent cases, PLIVA, Inc. v. Mensing and Mutual Pharmaceutical Co. v. Bartlett, by finding that generic manufacturers must replicate FDA-approved brand name labels.

The law is clear. But the problem for plaintiffs’ lawyers is that this clarity makes it harder to pursue lawsuits against generic drug makers.  With Congress unlikely to change the law and the Court’s position clear, plaintiffs’ lawyers have moved to Plan B: pressure the FDA to change its labeling rules.

Their efforts must be working, as the FDA announced this summer that it intends to propose a new rule that would allow generic drug manufacturers to change their labels without prior approval.

The proposed change will make warning labels inconsistent and confusing for consumers.  Identical drugs could have different warning labels from multiple manufacturers.

The proposed change would force generic manufacturers to conduct costly research and create a structure to assess their labels, which will in turn lead to higher drug costs.  But the real cost increase will come from a torrent of lawsuits alleging the generic labels are somehow inadequate.

The FDA figures that in 2010 generics alone saved Americans about $158 billion.  That’s an average of $3 billion a week.  An FDA rules change will certainly mean a higher bill at your local pharmacy.  But it also means that the world’s largest purchaser of drugs, the federal government, will pay tens of billions more on its drug bill.

The U.S. drug market is a carefully balanced ecosystem of name brand drug manufacturers, who invest in creating new life-improving and life-saving drugs, and generic drug manufacturers, who provide proven medicines to millions of Americans.  An FDA generic labeling rule change will benefit a few plaintiffs’ lawyers, at the cost of higher drug prices for millions of Americans.

Since generic drugs make up a major share of government drug expenditures, any increase in the cost of all drugs – generics and name brands – will cause health costs to rise significantly.  More expensive drugs would not only mean higher costs for Americans at the pharmacy, but also a huge hit to the American taxpayer’s pocket.

That should make everyone sick.

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