By Shalini Pandey
In an official blog post on Wednesday, the US Food and Drug Administration (FDA) Commissioner Scott Gottlieb said that they are working to lift regulatory barriers to generic drug competition. The development comes in the backdrop of US President Donald Trump’s electoral promise of making prescription drugs affordable to US citizens.
The roadmap for reformation
The move is aimed at providing affordable medicines to patients. Gottlieb said the US FDA is working on a Drug Competition Action Plan. In this regard, it intends to hold a public meeting on 18th July to solicit inputs on how FDAs rules are being used in ways that may hinder competition. According to a Bloomberg report last week, the administration is preparing an executive order aimed at lowering US drug costs.
This order will bring a change in the generic drugs market. Technically, generic drugs are copies of branded drugs that have exactly the same dosage, intended use, effects, side effects, route of administration, risks, safety, and strength as the original drug. Generics, in most cases, have the same efficacy as their brand-name versions, but patients can obtain them at a significantly lower cost.
What prompted this overhaul?
Drug manufacturers in the US are allowed to set their own prices. This results in the unregulated pricing variation for prescription drugs. Too many patients are being priced out of the medicines they need. While FDA doesnt have a direct role in drug pricing, we can take steps to help address this problem by facilitating increased competition in the market for prescription drugs through the approval of lower-cost, generic medicines, said Gottlieb. Over the last decade alone, generic drugs have saved the US health care system about 1.67 trillion USD, the Commissioner said in the blog post.
We know that sometimes our regulatory rules might be gamed in ways that may delay generic drug approvals in order to reduce competition. We are actively looking at ways our rules are being used and, in some cases, misused, Gottlieb said. He said one example of such gaming is the increasing unavailability of certain branded products for comparative testing. To perform the studies required to develop a generic alternative to a branded drug, a generic sponsor generally needs 1,500 to 3,000 doses of the originator drug. However, branded companies deliberately try to block its access to testing samples.
Impact of reforms on Indian drug makers
The latest announcement for reforms comes as a mixed bag for Indian generic drug makers. On the one hand, the move is likely to benefit Indian generic drug makers like Sun Pharmaceutical Industries Ltd, Dr Reddys Laboratories Ltd and Lupin Ltd, for whom the US accounts for nearly half of the total revenue. The move will grant them an opportunity to capture an even bigger market share since Indian drugs are already cheaper.
On the other hand, this move is likely to increase pricing pressure on Indian and the US pharma companies. The high prices of drugs have been attributed to monopolies and an inability of organisations to negotiate prices. But now, the monopoly will cease to exist. Foreign companies will supply cheaper generic drugs leading to a reduction in prices. Brokerage firm Credit Suisse said in a May report that annual price erosion in generic drugs in the US is likely to increase to 10-12% from 7-8% currently.
More competition means more pressure on drug prices and fall in margins for established generic drug makers, while the newer or late entrants could benefit due to a faster approval process. As new companies now enter the US and existing ones seek to introduce more products, competition will increase manifold, thereby depressing prices and making it tough to maintain market share.
What can save the Indian pharma companies?
As the prices of generic drugs are set to decline, Indian drug makers must rework their strategy of winning the markets through cheap medicines. A comprehensive plan is required to deal with the competition accompanied by a flood of generic drugs in the US. As pointed out by KPMG’s Utkarsh Palnitkar, Indian companies are still focussed on a low-pricing approach. However, in a changing landscape where margins are low and pricing pressure is high, companies need to diversify their product range, adopt differential strategies and focus on evolving as innovators. It is also crucial to resolve compliance issues and raise overall quality, he says.
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