Greater Access to Generic Drugs
New FDA initiatives to improve drug reviews and reduce legal loopholes
You might think that lower cost means lower quality, but that's
not the case with prescription drugs, says Gary Buehler, R.Ph.,
director of the Food and Drug Administration's Office of Generic
Drugs. "The FDA ensures a rigorous review of all drugs, and
consumers can be assured that generic drugs are as safe and effective
as brand-name drug products," he says.
Generic drugs are copies of brand-name drugs and are available
in both over-the-counter (OTC) and prescription form. For example,
ibuprofen is the generic version of the OTC pain medicine Advil.
Last year, the FDA approved the first generic of the prescription
anti-seizure drug Neurontin (gabapentin). Generics have the same
quality, safety, and strength as branded medicines. But for an
average brand-name drug that costs $72, the generic version costs
At roughly one-third the price of brand-name medications, generics
can bring consumers significant savings. A 2002 study by the Schneider
Institute for Health Policy at Brandeis University in Waltham,
Mass., concluded that if Medicare increased the rate of generic
usage to that of similar high-performing private sector plans,
its 40 million beneficiaries could see potential savings of $14
billion in 2003.
The FDA has made it a priority to encourage the availability
of generic drugs. FDA experts say there is no question that brand-name
drugs are also essential.
"Generic drugs are possible only as a result of the development
of new innovative drugs, and this innovation requires significant
investment," says former FDA Commissioner Mark B. McClellan,
M.D., Ph.D. "Without fair compensation from meaningful patent
protection, drug research and development would slow or stop."
According to the Boston-based Tufts Center for the Study of Drug
Development, the cost to develop a new drug averages $897 million.
The Pharmaceutical Research and Manufacturers of America (PhRMA)
reports that its member companies invested about $32 billion in
2002 in discovering and developing new medicines.
A brand-name company submits information to the FDA on patents
it holds on a drug and their expiration dates. Then the agency
lists patents on new drugs in the publication Approved Drug
Products with Therapeutic Equivalence, also known as the Orange
Book. Patent protection gives brand-name companies, also known
as "innovator" companies, the sole right to sell a drug
for a certain period of time. This allows them to fairly recoup
their investment costs. Patent protection for drugs typically
lasts an average of 11 years. A generic drug can only enter the
market after the brand-name patent or other marketing exclusivities
have expired and FDA approval is granted.
But rising drug costs remain a major challenge for consumers,
especially older Americans. "This is where generics play
an essential role," McClellan says. "Once the appropriate
patent protection has expired, generic medicines give patients
On Dec. 8, 2003, the Medicare Prescription Drug Improvement and
Modernization Act of 2003 was enacted. Title XI of that Act provides
for, among other things, limits on certain court actions that
could delay availability of generic drugs. The move is expected
to save consumers billions of dollars, as well as lower costs
for government and employer-provided coverage.
In addition, the FDA also continues initiatives to improve access
to generic drugs. These initiatives involve revamping the FDA's
review process to put generic drugs into consumers' hands more
quickly. The fiscal year 2005 FDA budget request includes increases
in funding for the FDA's generic drug program. The additional
funds would go toward increased staff and other improvements to
speed up generic drug reviews. The FDA routinely evaluates the
generic drug review program to find ways to increase efficiency
and get quality products into the hands of consumers to improve
the public health.
How Generics Get on the Market
The main reason generic drug companies can market their drugs
at lower prices is that they don't face the same development costs
as brand-name companies. Under the Drug Price Competition and
Patent Term Restoration Act of 1984, also known as the Hatch-Waxman
Act, generic drug companies don't have to repeat expensive clinical
"The Hatch-Waxman Act essentially created the generic drug
industry," says Buehler. Roughly two decades ago, generics
made up only 12 percent of all prescriptions. Now, generics represent
over 50 percent of all prescriptions in the United States, according
to the Generic Pharmaceutical Association (GPhA). "The law
paved the way for many more generic drugs because rather than
repeating research, generic drug companies instead must show the
FDA that their drugs are bioequivalent to the brand-name drug,"
When a drug is "bioequivalent" to another, it means
that its active ingredient works in the same way and in the same
amount of time as the brand-name drug. Scientists measure a generic
drug's bioavailability--the amount of the generic drug in the
bloodstream and how long it takes to get there. Then they compare
that measurement to the brand-name drug. While innovator companies
submit full new drug applications, generic companies submit what
are known as abbreviated new drug applications (ANDAs). Along
with showing that a generic drug has the same bioavailability
as the brand-name drug, generic companies must prove that their
products have the same active ingredient, follow the same quality
manufacturing standards, and have similar labeling. (See "FDA Requirements for Generic Drugs.")
The competition encouraged by the Hatch-Waxman Act helps to keep
drug costs down and also spurs innovator firms to develop more
new drugs, Buehler says. "The law aims to protect the intellectual
property rights of innovator companies, while also encouraging
the development of generic drugs," he says. As an incentive
for generic drug firms to submit ANDAs to the FDA, the first generic
challenger of patents is awarded a period of marketing exclusivity.
Reducing Legal Barriers
The Medicare Modernization Act will close legal loopholes in
the Hatch-Waxman Act that delay generic drug approval. For example,
only one 30-month "stay" is allowed under the Act if
an innovator company sues a generic company over patent issues.
This may occur after a generic applicant certifies that an innovator's
patent will not be infringed. Unless the innovator sues within
45 days after such notice, there is no 30-month stay. The innovator
can still sue, but no 30-month stay results.
A stay is the term for the delay in generic approval that occurs
when a brand-name company files a patent infringement lawsuit.
This delay is meant to be a time to resolve issues about whether
a generic drug company is infringing a drug patent. During the
stay the FDA cannot approve the generic drug.
A limit of one 30-month stay is in line with recommendations
from the Federal Trade Commission (FTC). According to an FTC study
released July 30, 2002, there were cases involving several brand-name
drugs between 1994 and 2000 in which repeated 30-month stays delayed
access to generic drugs.
Access to generic drugs has sometimes been delayed from four
to 44 months when drug companies have used various methods to
get repeated 30-month stays. Examples of delaying tactics include
submitting patent information on the color of the pill bottle,
ingredient combinations, and other minor matters that don't affect
the drug's effectiveness or safety.
Such strategies have been seen only in a minority of drug firms.
And, according to PhRMA, stays are rare. But the FTC concluded
that multiple stays can have substantial financial impact and
are "harmful to consumers." President Bush has said,
"Our message to brand-name manufacturers is clear: You deserve
the fair rewards of your research and development; you do not
have the right to keep generic drugs off the market for frivolous
A new regulation that went into effect Aug. 18, 2003, implements
another FTC recommendation, to tighten the patent submission and
listing process so that only appropriate patents are submitted
to the FDA. To help prevent unfair competition, the regulation
clarifies the types of patents that must be submitted to the FDA.
Companies must submit patent information on active ingredients,
drug formulations and compositions, and approved uses of a drug.
Certain patents, such as those for packaging claims, are among
those that cannot be submitted. More detailed information will
now be required on patent submissions, and false statements could
lead to criminal charges.
Kathleen Jaeger, GPhA president and chief executive officer,
praised the announcement of the generic drug regulation and said
it complements generic drug access provisions of the Medicare
"GPhA strongly believes that the administration's initiatives,
coupled with substantial legislative measures in the compromise
legislation, will ensure that American health care becomes more
affordable," Jaeger said in a statement. The legislation
overlaps with the FDA's regulation in one area in that it would
also prevent multiple 30-month stays in the approval of generic
In testimony before the Senate Judiciary Committee on June 17,
2003, Bruce N. Kuhlik, PhRMA's senior vice president and general
counsel, cautioned against changes that could "undermine
incentives for continued pharmaceutical innovation." He said,
"The Hatch-Waxman Act of 1984 is achieving its purpose of
speeding market entry of generic drugs."
Kuhlik pointed out that since the law was enacted, the generic
share of the drug market has soared, and so has the expense of
developing new drugs. "Our patent laws and regulations provide
a key incentive for continued innovation in medicines," Kuhlik
said. "Better treatments and new cures can come only from
pharmaceutical research companies, and only if patent incentives
More Efficient Reviews
2003, the FDA approved 263 generic drugs. The agency also issued
101 tentative approvals of generic drugs. A tentative approval
indicates that final approval of the application is delayed due
to patent or exclusivity issues. In 2003, 479 applications were
submitted for review. This is up from 392 the year before.
It takes 20 months on average for a new generic drug to be approved
by the FDA, and it usually involves multiple review cycles. Very
few applications are approved on the first cycle, but about a
third are approved on the second cycle. Sometimes multiple review
cycles can't be avoided, but the FDA has identified the lack of
early communication between generic drug companies and the FDA
as one cause for multiple review cycles. With the proposed increases
for the generics budget, the FDA plans to increase resources that
would make earlier communications possible.
The agency plans to hire more review experts to help speed up
the review of generic drug applications so that review time can
be reduced by at least two months. The goal is to provide guidance
to industry to allow for submission of more complete of applications
the first time they are submitted, rather than going through multiple
review cycles because of problems. Each round of review generally
means many months delay in approval.
The new resources, along with other improvements, such as adding
another chemistry review division, are expected to reduce the
total time to approval for most new generic drugs by three months
or more over the next three to five years. One new approach will
be to develop an FDA standard for giving generic companies initial
feedback on obvious minor deficiencies within 10 days after the
first review cycle is completed. Applicants will have an opportunity
to respond and amend an application to try to avoid a whole new
Getting the Word Out
"Generic Drugs: Safe. Effective. FDA Approved." That's
one of the slogans featured in an FDA consumer education program
to promote consumer confidence in generic drugs. The FDA messages
have been featured in newspaper articles, posters, and brochures
highlighting the safety and effectiveness of generic drugs. Public
service announcements have appeared in major magazines and journals,
as well as on the radio. Posters and brochures are being distributed
at major pharmacies throughout the country. Advertisements rolled
around on buses in Chicago, Los Angeles, and New York, and have
appeared on billboards in Michigan.
Consumers want lower-cost options for drugs, according to AARP,
a nonprofit organization that addresses the needs of people ages
50 and older. In a recent AARP survey of 1,046 people ages 45
and up, 84 percent said generic drugs are important for controlling
drug costs. Most also said they usually choose generics over brand
names when generics are available. And 24 percent reported not
being able to afford a prescription drug when no generic was available.
Richard Cole, senior vice president of corporate communications
at Blue Cross Blue Shield of Michigan, says in a statewide survey
he conducted in the summer of 2001, most people said they believe
generic drugs are equivalent to brand-name drugs. "In the
past, the conventional wisdom was that if we increased education
about generic drugs, it would look like our only motives were
to save money for the company," Cole says. "But consumers
reported that they saw it as our job to tell them about generic
In the fall of 2001, Blue Cross Blue Shield invited all Michigan
pharmacies to participate in a competition to increase generic
dispensing rates. The goal was to increase generic use among Michigan
Blues members by one percentage point, which would result in a
$17 million savings for both the company and the customers, Cole
Blue Cross Blue Shield challenged pharmacies to develop in-store
campaigns and tracked generic dispensing rates. More than 1,000
Michigan pharmacies competed. The prize for the stores with the
highest rates: featured spots in a $1 million advertising campaign
with the slogan "Generic Drugs--The Unadvertised Brand."
Rite Aid won for the retail chain category and Grand Value Drugs
of Detroit won for the independent pharmacy category. Cole estimates
that the annual savings for Michigan Blues members was more than
"People don't want a less expensive drug if they think the
quality isn't good," Cole says. "When you or a member
of your family gets sick, you don't want second best. But you
don't have to worry about that with generic drugs."
The FDA's Center for Drug Evaluation and Research would like
to hear from organizations interested in partnering with the FDA
on its generic drug education program. For more information about
a potential partnership, call (301) 827-7503.
FDA Requirements for Generic Drugs
- Generic drugs must have the same active ingredients and the
same labeled strength as the brand-name product.
- Generic drugs must have the same dosage form (for example,
tablets, liquids) and must be administered in the same way.
- Generic drug manufacturers must show that a generic drug is
bioequivalent to the brand-name drug, which means the generic
version delivers the same amount of active ingredients into
a patient's bloodstream in the same amount of time as the brand-name
- Generic drug labeling must be essentially the same as the
labeling of the brand-name drug.
- Generic drug manufacturers must fully document the generic
drug's chemistry, manufacturing steps, and quality control measures.
- Firms must assure the FDA that the raw materials and finished
product meet specifications of the U.S. Pharmacopoeia, the organization
that sets standards for drug purity in the United States.
- Firms must show that a generic drug will remain potent and
unchanged until the expiration date on the label before it can
- Firms must comply with federal regulations for good manufacturing
practices and provide the FDA a full description of facilities
they use to manufacture, process, test, package, and label the
drug. The FDA inspects manufacturing facilities to ensure compliance.