Too Much Success for Generics? GPhA’s Neas Defends Hatch-Waxman

Newly installed GPhA CEO Ralph Neas has a lot to juggle these days on Capitol Hill, between drug shortages and user free agreements for generics and biosimilars. But one thing Neas wasn’t expecting was a threat to Hatch-Waxman. Has the generic drug industry become too successful for its own good?

The Generic Pharmaceutical Association certainly has full plate these days. Between the inaugural generic drug user free agreement with the Food & Drug Adminsitration, the highly public drug shortage crisis, and a new approval pathway for biosimilars, it’s surprising that Ralph Neas, the newly installed president and CEO of GPhA, is getting any sleep.

But if all that weren’t enough to juggle, the recent round of Congressional hearings on the generic drug industry’s user fees agreements with the Food & Drug Administration gave Neas something else to worry about: The possibility that Congress would reopen the Hatch-Waxman Act of 1984 and reconfigure the very law that created the modern day generic drug industry nearly 30 years ago.

During a House Energy & Commerce/Health Subcommittee’s hearing last month on the biosimilar and generic drug user free agreements, Rep. Phil Gingrey (R-Ga.) questioned whether Congress should reopen Hatch-Waxman and extend market exclusivity for innovator drugs to give brand name manufacturers more time to recoup R&D costs, and bring incentives in line with those given to novel biologics under the Affordable Care Act.

Rep. Gingrey quoted from a November 2011 Health Affairs article by Duke University economics professor Henry Grabowski, in which Grabowski argued that the generic-brand balance has tipped too favorably toward generics in recent years. Congress, Grabowski said, could address that imbalance by halving first-filer rights for generic drugs from 180 days to 90 days, and by extending market exclusivity for innovator drugs from five years to 12 years. (Also see "Exclusivity For Biologics, Drugs Should Be The Same After All, Grabowski Says" - Pink Sheet, 7 Nov, 2011.)

After quoting from Grabowski’s article abstract, Rep. Gingrey asked FDA’s Center for Drug Evaluation & Research Director Janet Woodcock whether she thought Congress should review the “current paradigm” under Hatch-Waxman “to ensure the intended balance of cost savings and innovation continues.”

Woodcock initially demurred, telling Rep. Gingrey that such a decision would be up to Congress, not FDA. But she also acknowledged that while there have been “tremendous cost savings” under Hatch-Waxman, “the innovator industry is struggling.” Woodcock concluded: “That correct balance is a very complicated economic issue that I’m not able to opine on, and it involves many societal trade-offs.” That issue, she said, would require a separate discussion.

Rep. Gingrey intrepreted those comments as a suggestion that Woodcock “has some concerns” that the balance between innovator drugs and their generic counterparts had fallen out of favor. In response, Woodock said: “Many of us are concerned about the health of the innovator industry, which is what brings new products and treatments and cures to people who lack therapies right now. However, whether or not Hatch-Waxman is the way to do that is beyond my purview.”

“Gutting” Hatch-Waxman

To GPhA’s Neas, the Hatch-Waxman Act wasn’t something anyone in the generic drug industry thought would need defending. After all, Neas told GPhA’s annual conference on February 24, generic drugs have saved the health care system nearly $1 trillion in the last decade, and are now averaging savings of about $3 billion every week. “It’s been such an unqualified success,” he said in an interview.

But has the generic drug industry become too successful?

In the Health Affairs article cited by Gingrey, Grabowski argues that “the Hatch-Waxman Act of 1984 raises questions as to whether the Act’s intended balance of incentives for cost savings and continued innovation has been achieved. Generic drug useage and challenges to brand name patents have increased markedly, resulting in greatly increased cost savings, but also, potentially reduced incentives for innovators.”

Neas acknowledged that threat during GPhA’s annual conference. “There are those that would see to gut the ‘heart and soul’ of this landmark law,” he said. “They argue…that Hatch-Waxman has somehow been too successful, that it now threatens to hamper the innovation of new medicines on which we all rely.” But to “threaten the substance of Hatch-Waxman would put at risk the sustainability of the American health care system. We have no mission that is more critical than to assure the preservation of Hatch-Waxman.”

To that end, Neas plans to use GPhA’s newly formed Affordable Medicine Research Institute to “educate” the public—and members of Congress—about Hatch-Waxman. The creation of the non-profit research arm was Neas’ first request to the GPhA board as CEO. “I was surprised that we did not have a research institute, because it seems to me that there’s a need always for public education.”

“When I was interviewing for this job, I said the industry has a wonderful story to be told,” Neas said. “It would be very wise to explain to the American people, and to Congress…exactly what Hatch-Waxman has been responsible for, how outstanding the results have been…and how much it saved the system. That would be a wonderful initiative: the impact of Hatch-Waxman and why it shouldn’t be gutted.”

Is there a serious threat to Hatch-Waxman? Neas doesn’t think so, but he still wants industry to be prepared. “I don’t think that Congress would do anything to undermine Hatch-Waxman,” he said. The coalition that would support Hatch-Waxman— between industry, the insurers, pharmacists, physicians, nurses and hospitals—“would be maybe the largest coalition ever,” he said. “Everyone would be up in arms.”

But as the CEO of GPhA, “I thought it was enormously important that I bring it to everyone’s attention that…there are people making these arguments. If people start making these kind of arguments, it’s certainly my job to take them seriously and be prepared for any eventuality.”

“Do I think it’s going to happen? I would say most likely not, but I would be irresponsible if I didn’t do everything possible to make sure if it ever did come up it would be something that would be defeated by a resoundingly high bipartisan margin.”