Bills
| 3.23.22

Should Branded Drug Manufacturers’ Anti-Competitive Practices Be Regulated? (S. 340)

Do you support or oppose this bill?

What is S. 340?

(Updated January 18, 2022)

This bill — the CREATES Act of 2019 — would aim to promote a more competitive drug market by creating a pathway for expediting generic drugs’ launches. It’d crack down on anti-competitive practices by branded drug manufacturers by allowing the purchase of samples, which are needed for generic companies to develop and test generic products side-by-side with branded products. It’d also ensure that generic companies are able to access branded companies’ Risk Evaluation Mitigation Strategy with Elements to Saffer Safe Use (REMS with ETASU) protocols, which are necessary safety protocols for certain types of drugs.

When access to samples is blocked, this bill would permit a biosimilar or generic manufacturer to sue in federal court for injunctive relief to obtain the sample it needs for development. In such cases, limited damages could also be awarded as a deterrent in certain particularly egregious cases.

This bill also gives the FDA more discretion to approve alternative safety protocols, rather than requiring the branded and generic companies to develop shared safety protocols. However, any safety protocol would still have to be approved by the FDA, and must meet the same rigorous safety standards as those already in place.

This bill’s full title is the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act of 2019.

Argument in favor

Branded drug companies are actively making it harder for generic drug manufacturers to develop and test new generic products, harming consumers and the federal government by keeping drug prices high and reducing competition. This bill would address the problem by making it easier for generic drug companies to get the information and branded product they need for generic development.

Argument opposed

It’s incredibly expensive and difficult to develop a new branded drug, and the manufacturers that manage to do so rightfully should be able to make money on their branded product for however long it takes a generic company to develop the same formulation. Since this bill doesn’t end the seven-year exclusivity period for branded products, it’s unlikely to actually help generic products come to market faster — the only likely effect is that it’ll create frivolous lawsuits that don’t benefit anyone.

Impact

Consumers; pharmaceutical product users; pharmaceutical industry; branded drug developers; generic drug developers; biosimilar drug developers; and the FDA.

Cost of S. 340

Last Congress, the CBO and the Joint Committee on Taxation (JCT) estimated that implementing this bill would have the following effects over the 2019-2028 time period: reduce direct spending by $3.3 billion, increase revenues by $0.6 billion, reduce unified budget deficits by $3.9 billion, and reduce spending subject to appropriation by a net $87 million. All told, this would result in a $3.9 billion net decrease in the federal deficit.

Additional Info

In-Depth: Sen. Patrick Leahy (D-VT) reintroduced this bill from the 114th and 115th Congresses to combat anticompetitive practices used by some brand-name pharmaceutical and biologic companies to block lower-cost generic drugs’ entries in the market:

“I hear from Vermonters every day that rising prescription drug prices are a larger strain each year on their tight budgets.  For too long, a few predatory name brand companies have used anticompetitive strategies to delay entry of lower cost generic drugs.  When these companies use unfair practices to keep drug prices artificially high, patients suffer. Patients, families and government programs shouldn’t have to cope with increased drug costs to help name brand companies’ bottom lines.  Our bipartisan bill continues to gain momentum. It is precisely targeted to stop these abuses, and I’m committed to working on behalf of Vermonters in Congress to see that CREATES and other vital efforts to lower prescription drug prices are signed into law.”

Senate Finance Committee Chuck Grassley (R-IA), an original cosponsor of this bill, adds:

“Generic alternatives to brand-name medications provide consumers with greater choice and more affordable prescription drug options, but anti-competitive practices by some brand-name pharmaceutical companies block access to these lower-cost generics. This behavior hurts consumers and costs taxpayers billions. The bipartisan CREATES Act respects intellectual property rights and encourages greater competition that will inevitably lower the price of prescription medications for the American patient. It also saves $3.9 billion in taxpayer dollars and likely far more for consumers and private insurers. I look forward to getting this important tool passed so we can improve access to lower-cost generic drugs.”

Sen. Amy Klobuchar (D-MN), an original cosponsor of this bill who’s running for the Democratic Party’s presidential nomination in 2020, adds:

“No family should ever be forced to decide between filling a prescription or putting food on the table. This legislation will help end the unfair practices that drive up prescription drug costs and deter pharmaceutical companies from blocking cheaper generic alternatives from entering the marketplace. All Americans should be able to afford the lifesaving medication they need.”

In a joint letter to this bill’s four original Senate cosponsors, the AARP, AFL-CIO, and over 50 other organizations wrote:

“The CREATES Act is a bipartisan, market-based solution to increase competition and thus lower prescription drug prices for patients and consumers. This reform helps speed the introduction of generic and biosimilar medicines by facilitating the purchase of brand name drug samples on market-based terms from pharmaceutical companies who otherwise would use anticompetitive tactics to block access. The CREATES Act will help ensure that brand-name pharmaceutical companies cannot take advantage of regulatory rules to forestall the competition that is essential for access and innovation. With its enactment, the CREATES Act will save patients and taxpayers $3.9 billion over ten years, according to the Congressional Budget Office, by allowing lower-priced generic drugs to enter the market earlier. “

Former Rep. Henry Waxman (D-CA), who cosponsored the legal foundation for the U.S. generics drug market, The Drug Price Competition and Patent Term Restoration Act of 1984 (colloquially referred to as “Hatch-Waxman” for its two cosponsors, Reps. Waxman and Orrin Hatch (R-UT)), is among one of this bill’s most vocal supporters. In February 2018, former Rep. Waxman told The Center for Biosimilars that this bill “tackles one of the numerous problems driving high drug prices” and would save patients and the federal government billions:

“[This bill] tackles one of the numerous problems driving high drug prices—drug manufacturers’ use of anti-competitive tactics to block access to generic drugs. If passed, the CREATES Act would increase the development and availability of generic drugs. Not only is it good policy, but it could save patients more than $5 billion and the federal government more than $3 billion over 10 years, helping to pay for other necessary federal spending, including Community Health Centers. Taking these steps to counter generic delay tactics could help address one of the factors driving high prescription drug prices. Such action may also serve as an important opening for further conversations on how we can regain the balance of incentives for drug innovation and competition that was established under the Hatch-Waxman Act.”

However, some of this bill’s detractors argue that it’ll only lead to new litigation rather than a speedier path to generic and biosimilar development and market entry. Writing in The Hill, Peter J. Pitts, a former FDA Associate Commissioner who now serves as president of the Center for Medicine in the Public Interest, contends that this bill as currently written wouldn’t achieve its aims and is “ripe for abuse” via frivolous lawsuits:

“[A]s written, the CREATES Act is ripe for abuse by entities that have no intent to actually develop a generic or biosimilar version of the covered product. This potential for abuse is exacerbated by the significant monetary damages available under CREATES -- up to the amount of revenue generated on the covered product during the period of violation. Indeed, in certain instances, it may be more profitable to litigate and obtain damages under CREATES than it would be to actually market a generic/biosimilar product… As currently drafted, the CREATES Act could have significant unintended consequences: The damage provisions of the current draft create the potential for windfall damages, which will distort incentives. Specifically, the bill allows for damages up to the entire gross profit of the brand medicine during the period of negotiations. This creates a powerful incentive for generic companies to prolong negotiations (increasing their damage award), which will actually delay generic entry and competition in the marketplace. Indeed, generic developers would be able to earn more from a lawsuit than from actually selling the proposed generic drug. An ‘opportunistic’ company (Can you say ‘Shkreli?') could develop a business model of demanding samples and engaging in litigation for damages without ever submitting an abbreviated application to FDA -- undermining the bill’s stated goal to speed availability of lower-cost drugs for patients.”

However, Pitts suggests that adjusting this bill’s approach, rather than scrapping it entirely, is the best path forward:

“Here’s a savvy path forward: Establish an affirmative defense for license holders where the license holder has made a timely offer to provide sufficient quantities of samples at commercially reasonable, market-based terms. Such an affirmative defense is intended to prevent frivolous litigation -- where samples are offered on commercially reasonable terms, the eligible product developer should not be able to decline the offer and continue litigation. The term ‘commercially reasonable, market-based terms’ is defined to provide further clarity to all parties and avoid unnecessary litigation. Remedies would not be available if the license holder has established an affirmative defense by a “preponderance of the evidence.” This affirmative defense also protects good acting companies from protracted litigation and stops generic sponsors from unnecessarily prolonging negotiations to increase damages. Revision to the definition of “eligible product developer” to clarify that the eligible product developer must be a person that seeks to develop “and submit” an application for a generic or biosimilar product. These changes will help ensure that only legitimate manufacturers are considered eligible product developers for purposes of CREATES; entities that seek only to engage in frivolous litigation and do not seek to submit a generic/biosimilar product application would not be eligible for the remedies under CREATES.”

This bill has 31 bipartisan Senate cosponsors, including 15 Democrats, 15 Republicans, and one Independent. A House version in the current Congress, sponsored by Rep. David Cicilline (D-RI) with the support of 39 bipartisan cosponsors, including 29 Democrats and 10 Republicans, passed the House Energy and Commerce Committee unanimously (50-0).

In the 115th Congress, Sen. Leahy introduced this bill with 30 bipartisan Senate cosponsors’ (15 Republicans, 14 Democrats, and one Independent) support and it passed the Senate Judiciary Committee but didn’t receive a full Senate vote. A House version in the 115th Congress, introduced by Rep. Tom Marino (R-PA) with the support of 25 bipartisan House cosponsors, including 13 Democrats and 12 Republicans, didn’t receive a committee vote. When Sen. Leahy first introduced this bill in the 114th Congress, it had 11 bipartisan Senate cosponsors, including six Republicans and five Democrats, and didn’t receive a committee vote.

This bill is supported by a diverse coalition that includes the AARP, Campaign for Sustainable Rx Pricing, American College of Physicians, FreedomWorks, Campaign for Sustainable Rx Pricing, The Heritage Foundation, and others. As of February 5, 2019, there were over ninety organizations signed on to support this bill, and they’d written 10 coalition letters to express their support.

Despite being introduced three times with broad bipartisan support each time, this bill hasn’t passed in the full House or Senate in either of the previous Congresses it was introduced in. This is due in part to stiff opposition from the pharmaceutical industry. In April 2018, reported that the Pharmaceutical Research and Manufacturers of America (PhRMA) spent approximately $10 million on lobbying efforts, including efforts to halt this bill’s progress, in the first quarter of 2018. The Hill reported:

“PhRMA spent the first quarter of [2018] battling the CREATES Act, a bipartisan bill intended to increase competition among generic and branded drug manufacturers. Congressional supporters of the bill intended to include it in the spending bill passed in February, but it didn't make it in, a huge win for the drug industry and PhRMA, who argued it would have created ‘frivolous litigation.’”

Michael Brzica, vice president of government affairs at AAM, says he sees “a more significant appetite” among lawmakers for addressing high drug prices in the current Congress. He says that renewed interest in drug pricing among lawmakers may be driven by “a tremendous amount of media attention to the issue, either driving or in response to public concern,” creating a “perfect storm” for legislators from both parties to feel compelled to collaborate on legislation like this to target the cause of high drug prices.


Of Note: When a new drug is approved by the FDA, the developing company generally receives a patent and a “period of exclusivity” during which no other company — including generics — can market the drug. These exclusivity periods vary in length, but are generally seven years long.

Generics provide lower-cost alternatives to brand-name drugs, but in order for companies to safely develop these versions, they need samples of the original drugs (also known as the “covered product”) to accurately compare their product to the original version. This is needed to test the generic and branded drug side-by-side to prove bioequivalence to the FDA. Some brand-name drug manufacturers have refused to provide these samples, hindering generic competitors’ abilities to bring lower-cost drugs to market.

Health and Human Services (HHS) Secretary Alex Azar and Food and Drug Administration (FDA) Commissioner Scott Gottlieb, M.D. have raised awareness of brand manufacturers gaming FDA regulatory rules to deny would-be generic competitors the ability to purchase brand-name samples for FDA testing. Secretary Azar noted, “We know that certain brand-name manufacturers are abusing the system by blocking access to samples and hiding behind FDA’s rules when they do it...They’re using laws intended to promote the public health to pad their profits instead.”

In 2018, the FDA released new guidance on this issue and published a database identifying over 160 instances where access to samples was at issue. The FDA’s first “name and shame list,” published in May 2018, listed 164 inquiries covering over 50 prescription drugs where access to samples was at issue. FDA Commissioner Gottlieb called anti-competitive tactics “unfair and exploitative practices, and they’re in direct conflict with our broader public health goals.”

The Federal Trade Commission (FTC) has found that pay-for-delay agreements delay generics getting to market by an average of 17 months, during which time consumers are forced to continue paying brand-name drug prices that can be up to 85 percent higher than generic counterparts’ prices. FTC Acting Director Marcus Meier has raised his own concerns about drug companies’ use of anti-competitive practices and endorsed this bill as a solution:

“The Commission supports the goals of the CREATES Act to protect the competitive process by eliminating incentives and opportunities for branded manufacturers to engage in manipulation of the REMS process to delay generic entry.”


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / ShutterWorx)