[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
INCREASING GENERIC DRUG UTILIZATION: SAVING MONEY FOR PATIENTS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
MAY 18, 2005
__________
Serial No. 109-16
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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------------------------------
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
Bud Albright, Staff Director
David Cavicke, Deputy Staff Director and General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Health
NATHAN DEAL, Georgia, Chairman
RALPH M. HALL, Texas SHERROD BROWN, Ohio
MICHAEL BILIRAKIS, Florida Ranking Member
FRED UPTON, Michigan HENRY A. WAXMAN, California
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia FRANK PALLONE, Jr., New Jersey
BARBARA CUBIN, Wyoming BART GORDON, Tennessee
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOHN B. SHADEGG, Arizona ANNA G. ESHOO, California
CHARLES W. ``CHIP'' PICKERING, GENE GREEN, Texas
Mississippi TED STRICKLAND, Ohio
STEVE BUYER, Indiana DIANA DeGETTE, Colorado
JOSEPH R. PITTS, Pennsylvania LOIS CAPPS, California
MARY BONO, California TOM ALLEN, Maine
MIKE FERGUSON, New Jersey JIM DAVIS, Florida
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
SUE MYRICK, North Carolina JOHN D. DINGELL, Michigan,
MICHAEL C. BURGESS, Texas (Ex Officio)
JOE BARTON, Texas,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Berger, Jan, Chief Clinical Officer, Caremark................ 19
Cramer, Bonnie M., Board of Directors, American Association
of Retired Persons......................................... 29
Gottlieb, Scott, American Enterprise Institute............... 38
Jaeger, Kathleen D., President and CEO, Generic
Pharmaceutical Association................................. 10
Perry, Bruce C., Medical Director, The Southeast Permanente
Medical Group, Kaiser Permanente........................... 33
Material submitted for the record by:
National Association of Chain Drug Stores, prepared statement
of......................................................... 69
(iii)
INCREASING GENERIC DRUG UTILIZATION: SAVING MONEY FOR PATIENTS
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WEDNESDAY, MAY 18, 2005
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:04 p.m., in
room 2322 of the Rayburn House Office Building, Hon. Nathan
Deal (chairman) presiding.
Members present: Representatives Deal, Bilirakis, Shimkus,
Shadegg, Bono, Ferguson, Myrick, Burgess, Barton (ex officio),
Brown, Waxman, Green, Strickland, Capps, Allen, and Baldwin.
Staff present: Chuck Clapton, chief health counsel; Ryan
Long, professional staff; Bill O'Brien, legislative analyst;
Eugenia Edwards, legislative clerk; Brandon Clark, health
policy coordinator; John Ford, minority counsel; and Jessica
McNiece, research assistant; and David Vogel, research
assistant.
Mr. Deal. I call the meeting to order. I am pleased to have
this opportunity to have these distinguished members of the
panel here, today.
And in my opening statement, I want to simply welcome you,
and I will go ahead and introduce each of you as we go along
the table: Ms. Kathleen Jaeger, who is President and CEO of the
Generic Pharmaceutical Association. We are pleased to have you
with us. Dr. Jan Berger, the Chief Clinical Officer of
Caremark. Ms. Bonnie Kramer, Board of Directors Member of the
American Association for Retired Persons. Dr. Bruce Perry,
Medical Director for the Southeast Permanente Medical Group in
Atlanta, Georgia, representing Kaiser Permanente. And Dr. Scott
Gottlieb of the American Enterprise Institute. We are certainly
pleased to have such a distinguished group before us today.
Given the increase in expenditures on healthcare costs in
our country, I believe all of us would agree that it is
appropriate that we are here today to explore the significant
cost savings for American consumers and the American taxpayers
if we could increase the rate of utilization of generic
pharmaceuticals. Although the United States has one of the
highest rates of generic utilization in the world, and generics
available in our country are up to 50-percent cheaper than
those available in other countries, we are still leaving
significant savings on the table through under-utilization.
In fact, a recent HHS report conservatively estimates that
in 2003, U.S. consumers could have saved an additional $17
billion if they would have fully utilized the generic drugs
available on the market today. And the FDA states that a
typical patient could reduce their per-day cost by 14 to 16
percent by fully utilizing generic pharmaceuticals. Amazingly,
for every 1-percent increase in generic drug utilization, it
has been estimated that consumers and third-party payers could
save between $1.3 and $4 billion every year. Clearly, generic
pharmaceuticals could provide real savings for real people and
could do so in a way that does not put patients' safety at
risk.
That is why I am excited about the opportunity we have
before us today to further explore ways to lower some of the
obstacles to increased use of generic pharmaceuticals and to
highlight some of the efforts already underway to achieve these
important goals. Again, I welcome our distinguished members of
the panel, and at this time, I will recognize my friend Mr.
Brown from Ohio for his opening statement.
Mr. Brown. Thank you, Mr. Chairman. I very much appreciate
your having this hearing today on generic medicines as a
vehicle for reducing healthcare costs. And thanks to the five
witnesses who are with us today, too.
If the prescription drug market worked like other markets,
a brand-name drug would enjoy a well-defined, immutable period
of market exclusivity to reward and compensate innovation, and
competition would drive the price down to more or less the cost
of production plus a reasonable profit. The foundation for this
free market structure is written into our Constitution. The
Constitution requires the Federal Government to protect
intellectual property, as we know; it also requires defining
limits on that protection to prevent exploitation of consumers.
When it comes to prescription drugs, the public has a huge
stake in the market working as it should. Unlike most
innovations, new drugs and other healthcare innovations can
have a direct bearing on human suffering and on human survival.
That is why there is so much tension between innovation and
access. That is why the public finances prescriptions drugs for
millions of Americans who otherwise couldn't afford them. That
is why anticompetitive behavior in the prescription drug market
isn't just unethical; it is immoral.
I am sorry that pharma refused to participate in today's
hearing. I don't particularly like leveling charges at brand-
name drug makers when our friend and former colleague Billy
Tauzin is not here to defend their actions.
We can't responsibly discuss generic utilization without
discussing the tactics used to delay generic approvals.
Utilization of approved generics may be less than 100 percent,
but utilization of approvable but unapproved generics is zero.
Brand-name drug manufacturers abuse the citizen-petition
process to unjustifiably delay approval of generics. I am
pleased the FDA is trying to tighten up the process to prevent
such abuses. The agency can--and the agency should establish
reasonable timeframes for review of these petitions and permit
FTC to review them for anticompetitive intent.
Brand-name drug companies also compete against themselves
to undermine the incentive for timely generic competition. They
do this by producing authorized generics, which are no more
than repackaged and re-priced versions of their brand products.
Drug makers could simply reduce the price of their brand name
products to the generic drug level, which would benefit
consumers even more than generic competition, at least until
the myths about generic inferiority are completely dispelled.
They could price their generic product competitively, which
would obviate the need for true generic competition; instead,
they reduce the generic price by a token amount, knowing that
their presence in the market curtails the profit potential for
true generic competition. FTC analyzed a few authorized
generics and decided they are not anticompetitive. Now, these
pseudo-generics are proliferating, and the anticompetitive
implications are clear.
Drug makers fight generic access at the State level. They
attach irrelevant patents to their drugs to gum up the generic
approval process. They play on fears about the quality of
generics, fears that are 20 years old and should have
evaporated when my colleague John Dingell helped to clean up
the generic drug industry. When generic drug competition
threatens one product, drug makers produce a slightly modified
version and market it as new breakthrough product. We could
name example after example.
They price it that way, too. I am all for incremental
advances, but when second-generation products are oversold,
overpriced, and the release is timed to thwart generic
competition, consumers, simply put, are being robbed. Drug
makers are currently pushing for a second Bioshield bill that
provides the industry an array of patent extensions. Even I
didn't expect the drug industry to sink so low as to exploit
the threat of terrorism in pursuit of windfall profits.
Drugs makers use directed consumers ads to convince
patients that the profitable drugs are the best ones. Like
other major industries, drug companies use advertising to
induce demand and develop brand loyalty. Except the drug
industry isn't like other industries: drug companies knowingly
involve themselves in life and death situations. Their products
aren't expendable, and the resources that purchase them are
indeed stretched thin. I appreciate the drug industry's efforts
to set standards for directed consumer advertising, but drugs
should be used because they are effective, not because they are
effectively advertised. Drug makers should voluntarily refrain
from DTC advertising and work with us to expand access to
objective information like that provided on the NIH website.
The bottom line, Mr. Chairman, is this: competition brings
drug prices down; generic drugs fuel competition.
Misinformation, misperceptions, outmoded practice patterns and
anticompetitive tactics frustrate competition. That, we cannot
afford.
Mr. Deal. I thank the gentleman. In fairness to pharma, I
must tell you that they were not invited to this hearing, since
we did not consider them to be a generic manufacturer.
Mr. Brown. Mr. Chairman, my understanding from the minority
staff is that we requested they be invited, and your staff told
us that they were, and they declined.
Mr. Deal. Well, I shall clear up to be sure, but I can
assure you that you are going to have more than your share of
opportunities to talk to our former Chair, Mr. Tauzin--probably
more than you want to.
Mr. Brown. I noticed there are more than 2 or 3 pharma
lobbyists roaming the Capitol from time to time, too, Mr.
Chairman.
Mr. Deal. Well, I am sure that you will have an opportunity
to do that. This hearing today, of course, hopefully, is more
focused on the generic issue. Mr. Bilirakis, the cochairman of
overall committee.
Mr. Bilirakis. Thank you very much, Mr. Chairman. I, too,
want to commend you on calling this hearing to examine the role
of generic drugs in lowering healthcare costs. As you, I am
sure, know, I have been a longtime proponent of generic drug
industry.
Generic drugs contain the same active ingredients as brand-
name drugs, for the most part; they meet the safety
requirements as brand-name drugs. They are just as efficacious
as brand-drugs--again, for the most part. They are held to the
same manufacturing standards as brand-name drugs. Generic drugs
are, in fact, just as safe and work just as well as their
brand-name counterparts, except that they often cost much less.
Congress enacted the Hatch-Waxman Act a little more than 20
years ago to establish the framework that currently governs the
entry of generic pharmaceutical products into the marketplace.
The law--which has worked well--was designed to both to speed
the entry of lower cost, generic drugs into the marketplace,
while preserving an environment that encourages companies to
develop innovative, new pharmaceuticals.
The Medicare Prescription Drug Law that we approved in 2003
built on the success of Hatch-Waxman by including provisions to
further decrease the time that it takes to bring generic
pharmaceuticals to the market. Consequently, more prescriptions
are filled for generics today than ever before. In 1984, only
about one-fifth of prescriptions were filled with generic
alternatives, compared to more than half today. That is good,
but I think not good enough.
We have not fully realized the potential that generic drugs
hold for lowering healthcare costs. The Department of Health
and Human Services recently reported that American consumers
could have saved $17 billion in the year 2003 if they would
have utilized generic drugs whenever they were available. There
are several reasons why generics are not used more often.
Certainly, one of those reasons is that many people, most
people, simply refuse to believe that generics work as well as
their brand-name counterparts. I have also heard that doctors
and pharmacists sometimes lack adequate information about the
safety, efficacy, and affordability of generics.
I want to make it clear that I strongly believe and support
the pioneering work--and I think we should underline the words
``pioneering work''--of America's pharmaceutical companies.
These companies take tremendous risks by spending billions of
dollars to bring new, lifesaving drugs to the markets. They
rightly reap the rewards when those drugs make it through the
rigorous approval process, and so do we. The work of the drug
companies that some so deride does save lives. Their research
and development allows others to bring generics to the market
more quickly and more cheaply. I believe we must continue to
ensure that we find an appropriate balance--and there is that
key word--between encouraging the use of lower cost, generic
alternatives and protecting the incentives for innovator
companies to continue their lifesaving and life-improving
research.
I look forward to the testimony, as we all do, of our
witnesses and am interested to hear their perspective on how we
can save patients and taxpayers billions of dollars by
encouraging the appropriate use of generic drugs. Thank you,
Mr. Chairman.
Mr. Deal. Thank the gentleman. Mr. Waxman?
Mr. Waxman. Thank you very much, and Mr. Chairman, it is a
pleasure to be at a committee where both Democrats and
Republicans agree that generic drugs are one of the more
effective ways to lower costs of prescription drugs to
consumers. That is certainly true, and FDA's rigorous
regulatory framework assures us that generics are as safe and
as effective as their brand-name counterparts. So I think that
we should do all we can to ensure that generics are available
and used widely.
The high cost of prescription drugs is one of the major
challenges facing the American healthcare system today. I think
we should be clear that the use of generics is only one part of
the solution to the problem of the high cost of prescription
drugs. We can do much more. First, we should remove the ban on
the Secretary's ability to use the purchasing power of 40
million Medicare beneficiaries to negotiate lower prices for
brand-name drugs. And second, the U.S. should not be paying
prices for their drugs that are many times the prices in other
countries. We need to change that.
Most drug expenditures, after all, are for drugs for which
there is no approved generic version, so until we deal with the
brand-name drug prices, we are not dealing with the problem.
However, increasing the availability and use of generic drug
products is of critical importance. Once generic products have
entered the market, consumers can avail themselves of the
drastic price advantages; but first, we must assure that
generic drugs make it to the market as soon as possible.
Unfortunately, today there is an entire class of products
known as biopharmaceuticals, widely known as biotech drugs, for
which there are no available generic alternatives. These
products account for billions of dollars in U.S. sales, and
generic versions of these products could create enormous
savings for consumers. We should do all we can to ensure that a
generic-approval system for biopharmaceuticals is put in place
as soon as possible. Every day delayed means American consumers
pay a higher price.
The threats to rapid access of generics to the market are
always with us. Incredibly, as we talk today, there is
legislation in the Senate that Mr. Brown referred to,
Bioshield, two proposals that would allow a brand-name company
to get up to a 2-year extension on any drug or product the
company markets, simply by developing a drug to deal with
bioterrorism illness or emerging infectious disease. This is
called a wildcard. It doesn't make sense. It is a gift of what
could amount to billions of dollars to those companies without
the consumers really getting what they need in exchange.
It is heartening to learn about practices of companies such
as Kaiser Permanente and Caremark that help create wider use of
generic products. We must continue to be vigilant in our
efforts to break down the barriers to rapid emergence of
generic drugs on the market and at the same time, pursue
equally vital options for lowering the cost of prescription
drugs in this country.
I am pleased to welcome the witnesses to our hearing today
and look forward to their testimony.
Mr. Deal. I thank the gentleman. I recognize Dr. Burgess
for an opening statement.
Mr. Burgess. Thank you, Mr. Chairman, and again, thank you
for holding this hearing on generic drug utilization.
There is no question that consumers should have access to
lower cost, safe medications, and generic drugs do provide a
vehicle to get here. Unfortunately, utilization of generic
drugs has not been as widespread as it should be. Based on
estimates in 2003, consumers could have saved $17 billion if
they had used more generic drugs, where appropriate.
Because of the inequities of foreign regulation and
regimes, the place of both prescription drug research and
development goes on in America, and the American consumers
bears the brunt of that. Generic drugs do provide consumers
with a much lower cost alternative than branded medications,
and we do need to consider remedying the inequities in the
foreign market through a more aggressive use of trade tactics.
Then, generic drugs can remain one of the few, safe low cost
options to consumers.
Within the Medicare Modernization Act, this Congress
provided much-needed reforms to the Hatch-Waxman drug-pricing
law to speed more generics to the market. Reducing the amount
of time that a brand-name manufacturer can reasonably maintain
a patent on a drug will give the consumers greater access to
lifesaving medications. I am interested to hear from the panel
how effective these reforms have been and whether consumers are
benefiting from the lower cost medications.
I am also hopeful that we can find ways to support more
utilization of generic drugs. Consumers need to have pricing
information available to them and differences between branded
and generic medicines. Increased transparency of the
marketplace, I believe, will benefit us all. The healthcare
network, from doctors to pharmacists and health plans plays a
vital role in helping patients realize substantial savings.
Finally, we need to ensure that medical decisions,
including the prescribing of generics, remains in the hands of
the physician. Substitute-therapeutics and placing other
mediation in the hands of the patient when the doctor has
prescribed something else really has no place in this debate,
and I would encourage our body, our Congress, not to practice
medicine by legislation because it is not appropriate for us to
do so. But when it is clinically appropriate to prescribe
generic drugs, we need to encourage their utilization.
Mr. Chairman, I look forward to hearing some information
from our panel today about the cost of generics. While we are
concerned about the cost of branded pharmaceuticals, sometimes
of the cost of generics is many, many hundreds of a percent
times the cost of their manufacture. Perhaps there are ways of
even getting the costs even lower than what we see today.
In the arena of biopharmaceuticals, Mr. Chairman, that is a
difference science, and that does bring a lot of different
issues into play. And we need to be very careful in this
Congress about legislating that type of development.
With that, Mr. Chairman, I will yield back.
Mr. Deal. I thank the gentleman. I recognize Ms. Capps for
an opening statement.
Ms. Capps. Thank you, Mr. Chairman, for holding this
hearing and to our witnesses for coming. The rising cost of
prescription medications is critical issue for this committee,
and that is because it is such a critical issue for our
constituents.
Increasing medication prices are making healthcare and
health insurance go through the roof--it is so expensive. And
they are hurting the quality of healthcare that we pride
ourselves on because they are putting needed therapies out of
reach for so many Americans. New prescription drugs are great
news for patients looking for new and better treatment, but
what a tragic irony for a patient to realize there is treatment
available, but not to that person because of the cost.
One part of the solution is clearly increased competition
with generic drugs. Generics that are currently on the market
give patients alternatives to expensive brand-name mediations.
Certainly, it is worthwhile to encourage doctors and patients,
where feasible, to use generics. But we also need to look at
how to get more generics onto the market.
This committee has heard many accounts of how some brand-
name prescription drug companies misuse the patent system to
keep generics off the market. Some of my colleagues today have
detailed some of these practices. And if we want to seriously
address the cost of prescription medication, we need to address
this problem squarely. But increasing generic access to market
is only going to solve part of the problem.
For many brand-name drugs, no generic is available, and for
some people--maybe few, but those people are important--like my
friend who has Parkinson's. The generic brand is not able to be
tolerated by her, so she needs to have the brand name.
We also need to find better ways to help Americans pay for
the medications that they need. This has got to be part of the
equation. For example, Medicare needs to be given the ability
to negotiate a lower drug cost for seniors and those with
disabilities. The fact that this was not permitted under the
Medicare Bill last year is one of its great failings.
No one is saying the prescription drug companies should not
make a profit. They have to make significant investments to
bring us the wonderful medications that they produce, and they
deserve some reward for the risks that they take. But their
products do little good for the patients we represent if they
are unavailable because they are so expensive. That is the
issue that this committee needs to be examining. This hearing
is a good start to that process, and I hope we will continue to
examine this issue. And I look forward to the testimony that is
about to begin. I yield back.
Mr. Deal. I thank the gentlelady. I don't see anyone else
here to make an opening statement. One thing about starting on
time is that we are ahead of most of our members, so you will
probably see some of them catch up as this hearing proceeds--I
hope.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Paul E. Gillmor, a Representative in
Congress from the State of Ohio
Thank you, Mr. Chairman for holding this important hearing.
While the new Medicare bill is just over the horizon, no matter how
you cut it, our constituents are fed up with the high cost of health
care, and in particular, the price of prescription drugs, whether it be
brand or generic; and that's just it.
Patients many times put brand and generic drugs in the same
category with regard to overall costs, even though they know generics
are cheaper. All too often, due to perception and a general lack of
education when it comes to generics, consumers ignore the fact that
brands and generics share identical ingredients, dosage, effectiveness,
quality, and safety. Even if a patient is well-aware of this
equivalence, it is likely that he or she will be offered through a
health plan, or prescribed by a physician, a more expensive brand drug
simply because of an unawareness that a competing generic is already on
the market.
I would also like to join my colleagues in drawing attention to the
recent HHS report, quoting $17 billion in consumer savings where
generics were available, but not utilized. I look forward to being
educated by the well-balanced panel of witnesses, about their efforts
to further educate physicians, pharmacists, health care providers, and
patients alike to ensure market access to generic drugs, resulting in
significant savings to patients' and taxpayers' pocketbooks.
Again, I thank the Chairman and yield back the remainder of my
time.
______
Prepared Statement of Hon. Charlie Norwood, a Representative in
Congress from the State of Georgia
Thank you, Mr. Chairman.
As Americans continue to struggle against the backdrop of high
prescription drug costs, generic drug utilization is essential. Today,
generics hold great hope for American consumers. There is at least one
generic product available for most of the top therapeutic classes.
Generics currently account for roughly 50 percent of all prescriptions
filled in the United States. Employers--who can no longer afford
unrestricted health benefits are seeking ways to stay competitive.
Generics have proven an effective answer.
Generics are holding their own in the marketplace and encouraging
their full potential is an admirable goal. But there is certainly room
for expansion. While, a 2005 study found that 7 in 10 consumers would
prefer a medicine that has been on the market for at least 10 years,
only 46 percent were willing to use generics for serious health
problems.
However, we should be encouraged that eighty-six percent of
consumers report that they would be willing to use generics for common
health problems. With 89% of seniors taking prescription drugs in the
past year and nearly half of those taking at least five, generic drugs
could save individuals and the federal government a lot of money.
According to estimates prepared by the Congressional Budget Office, in
2003 U.S. consumers could have saved as much as an additional $17
billion by purchasing generics.
This is not a new idea. Generic drug utilization has already been
the key to managing the growing cost of prescription drugs for private
insurance plans and individuals alike. Incentives to use generics have
enabled plan sponsors to continue providing coverage at a time when too
many are dropping health coverage.
As this subcommittee looks towards ways of increasing generic
utilization, we should focus our efforts on the relationship between
patients and their doctors and their pharmacists.
Often patients want a name brand drug because it is more familiar
to them. A good doctor--patient relationship can clarify that generics
are identical to a brand name drugs. As healthcare professionals work
to increase familiarity with, and knowledge of generics I believe that
they will become even more accepted.
However, generic utilization will not solve all of our problems.
There is a generic-utilization ceiling. Generics rely on the cycle of
name-brand drugs and patent protections to encourage research and
development into the next miracle pharmaceutical, which means future
opportunities for generic companies.
Maximizing the use of generic drugs is a first step in U.S.
efforts--to find better--market-driven--solutions to affordable
prescription drugs. There is not a generic drug for every prescription,
and patents rightfully protect name-brand drugs for their development
costs. We--need to spread the word that management of prescription drug
prices--through--market forces--is not an adversarial notion.
Our allies need to realize that market forces not government
intervention is the answer regarding name brand drugs. To lower the
price of name brand drugs we should address our allies' monopolistic
purchasing structures. But this is just another piece of the puzzle in
addition to, not in place of increasing generic use.
In this light, I am looking forward to our witnesses' testimony and
guidance. I yield back.
______
Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy
and Commerce
Thank you Chairman Deal for holding this hearing. I appreciate the
opportunity to hear from today's panel of witnesses about how generic
drugs can help lower the prices consumer pay for their medications.
I support lowering prescription drug costs. I also support free
markets and competition. Generic drugs achieve both of those goals, in
a way that is both safe and legal. In fact, generic drugs save
consumers, health plans and the Medicare and Medicaid programs tens of
billions of dollars every year.
Although you would never know it from the recent debates in
Congress on drug pricing, we passed a law in 1984 that has been one of
the most effective tools ever provided to consumers to lower their
prescription drug costs.
This law, known as Hatch-Waxman (named for the senator from Utah
and for our colleague from California), established a process for
approving generic versions of brand-name drugs. These new generic
versions are required to be identical to the originals, but are subject
to expedited review and approval processes. As a result, these drugs
are sold at a fraction of the cost of the original medications.
Since the mid-1980's we have seen a dramatic increase in generic
availability. Currently, a little over 50% of all prescriptions in the
United States are filled with generics, often at prices dramatically
lower than those charged for comparable brand name drugs.
Because we have such a robust generic drug industry, American
consumers actually paid $30 Billion LESS for generic drugs than
European consumers paid for equivalent products. We also managed to
achieve these savings without having to rely on the price controls that
kill innovation and deny patients new medications.
I believe, however, that we can do an even better job in educating
consumers about the advantages offered by generic drugs. According to a
report by the Health and Human Services Report released in December
U.S. consumers could have saved as much as $17 billion by purchasing
available generic substitutes for brand name drugs.
I look forward from hearing from the witnesses today about what
they are doing to promote cheaper, effective alternative medications.
Their experiences can help us prepare for the implementation of the new
Medicare prescription drug benefit in 2006 as well as assist our
efforts to reform the Medicaid program. I also hope to hear any
additional suggestions about how to further improve the current system
to promote competition and ultimately lower drug prices for consumers.
Thank you again, Chairman Deal for holding today's hearing, and I
yield back my time.
______
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Thank you, Mr. Chairman, for calling this hearing to examine the
use of generic prescription drugs and the savings that generics offer
to patients, health insurers and government programs.
For years, we have heard the reports about the soaring costs of
prescription drugs.
It's no secret that the brand name drugs--not the generics--are
behind this increase in drug costs.
In fact, in 2004 alone, brand name drug prices increased over 7
percent--more than twice the rate of inflation--while the price of
generics increased only one half of one percent.
Whether it is due to the increasing cost of brand-name prescription
drugs or increased patient and physician awareness, generic drugs are
without doubt penetrating the market.
More than 50 percent of all prescriptions are filled with generic
drugs, yet generics only account for 12 percent of prescription drug
spending.
When you look at it that way, it's easy to believe that generics
can be 70 to 80 percent cheaper than brand name prescription drugs.
These statistics suggest a tremendous opportunity for patients and
insurers to save critical health care dollars.
And in a time of extreme budget crunches both at the federal level
and in each of our states, we should take a long look at generic drugs
and the increasing role they can play in health care financing.
Our challenge is to examine what role the government should play in
increasing the availability of generic drugs and providing incentives
for their use.
In my state of Texas, the Legislature effectively made generic
prescriptions the default by mandating that physicians physically write
out ``brand necessary'' or ``brand medically necessary'' on the
prescription pad when no substitutions were appropriate.
The University of Texas's Center for Pharmaco-economic Studies
estimated that this one policy could save patients and drug benefit
programs in my state as much as $257 million each year.
One simple way to increase the utilization of generic drugs is to
make them more readily-available.
To that end, we need to look at current statutes and regulations
that have the effect of hindering the entry of generic drugs to the
market, whether it is through an examination of patents, authorized
generics or the approval process at the FDA.
I look forward to hearing from our witnesses on their experiences
and recommendations on these issues, and I thank them for appearing
before us today.
With that, Mr. Chairman, I yield back the balance of my time.
Mr. Deal. Once again, we are pleased to have you here. We
look forward to your testimony and the questions that will
follow. And Ms. Jaeger, I will call on you first for 5 minutes.
STATEMENTS OF KATHLEEN D. JAEGER, PRESIDENT AND CEO, GENERIC
PHARMACEUTICAL ASSOCIATION; JAN BERGER, CHIEF CLINICAL OFFICER,
CAREMARK; BONNIE M. CRAMER, BOARD OF DIRECTORS, AMERICAN
ASSOCIATION OF RETIRED PERSONS; BRUCE C. PERRY, MEDICAL
DIRECTOR, THE SOUTHEAST PERMANENTE MEDICAL GROUP, KAISER
PERMANENTE; AND SCOTT GOTTLIEB, AMERICAN ENTERPRISE INSTITUTE
Ms. Jaeger. Mr. Chairman and members of the committee, I am
Kathleen Jaeger, President and CEO of the Generic
Pharmaceutical Association. It is an honor to be here before
you today to speak on behalf of an industry that helps to fill
over 1 billion prescriptions a year, yielding annual savings of
ten of billions of dollars to consumers, businesses, and
government.
GPhA appreciates the opportunity to discuss current generic
pharmaceutical use and ways to both increase access and effuse
savings from these more affordable medicines. We will
recognize--yes? Absolutely. Sure. Is this better?
We recognize the importance of this issue to the committee,
given its broad jurisdiction over the nation's healthcare
systems, including private insurers, Medicaid, and much of the
Medicaid program.
Generic pharmaceuticals represent more than 53 percent of
all prescription dispensed in the Unites States. They account
for less than 12 cents of every dollar spent on prescription
drugs. According to the National Association of Chain
Drugstores, last year the average retail price for a brand drug
was $96.01. The average retail price of generic was $28.74--a
savings of nearly 70 percent per prescription.
It is important to note that while current generic
utilization saves America tens of billions of dollars each year
on the costs of medicines, a mere 1-percent increase in generic
usage will yield almost $4 billion in additional savings. Now,
let me repeat that fact. Moving 1 percent of the U.S. brand
prescriptions to FDA approved generics will yield almost $4
billion in savings, savings that can be used to help moderate
prescription drugs spending at both the Federal and State
levels and for individual customers as well.
Now, to see how this translates into real savings, we only
need to look at the generic utilization rates of some State
Medicaid programs. The States with the highest generic
utilization rates are Hawaii at 56 percent, and Illinois, in a
close second, at 55 percent. And dragging themselves into the
world of cost-containment are New Jersey and Delaware, with
both States having a meager 42-percent generic utilization
rate. If all the Medicaid programs obtained a generic
utilization rate in the high 50's, States and the Federal
Government would save billions of dollars annually.
Now, what explains the wide variance in generic drug rates
among the States? Well, easy. That is practices, practices that
are currently employed in most private insurers in some States.
And in fact, there are a number of initiatives that can be
immediately adopted or encouraged by this committee that would
rapidly increase the substitution of generic drugs.
Now, the easiest and most immediate place to start on
savings on prescription drugs involves the overlooked
prescription pad and physician-prescribing practices. At least
33 States require the physician to make a conscious decision
and to handwrite ``no substitution, dispensed as written'' or a
similar statement on the pad if only a brand drug can be
dispensed. Other States have a check-off box or require the
doctor to sign on a different line if they want the brand
product. Encouraging States to simply redesign the prescription
pad could form tremendous public savings for public and private
healthcare providers and consumers. And in fact, Texas did just
that in 2001 and saved $223 million a year.
The next best practice is the implementation of mandatory
generic-substitution programs where they do not currently exist
and strengthening such programs in States where loopholes may
lower the overall substitution. As an example of strengthening
a mandatory generic program, Massachusetts, recently took a
series of steps over a 3-year period that they estimate shaved
$150 million off the State's annual drug tab. A large part of
the savings came from implementing a tougher dispensed-as-
written program, requiring doctors to explain in writing the
need and get permission from the State in order for the brand
to be dispensed.
Another issue closely related to the mandatory-substitution
and physician-prescribing practices involves the elimination of
carve-outs for classes of drug products, including mental
health, diabetic, and epileptic, and cancer drug products to
name a few. Some States have, unfortunately, instituted this
bad practice, which is supported by special interests that make
it extremely easy for physicians to bypass generic-drug-
substitution laws. This carve-out policy is based on the
erroneous assumption that the use of generics will undermine
the treatment outcomes. There is no scientific or medical basis
for this assertion; and thus, it unnecessarily increases State
Medicare program costs by millions of dollars. This bad
practice must be stopped.
There also are several additional best practices relating
pricing and incentives that will dramatically reduce drug
expenditures. These involve implementing aggressive, maximum
allowable cost--or MAC--formulations by capping the maximum
price States will pay for certain prescriptions and having
pharmacists having the incentive to dispense the less expensive
generic. While some States do adopt these, others do not, and
slightly over half the States take advantage of their ability
to set their own payment ceilings for multi-source drugs. And
for that do, not all of these States have implemented an
aggressive MAC system, leaving unrealized savings on the table.
And finally, an area of virtually untapped opportunity for
generic utilization involves the investment in consumer
education: an aggressive effort to educate providers and
patients about the safety, sameness, and savings of generics.
And of course, those who administer healthcare plans such as
Kaiser and Caremark, here, know all too well that differential
co-payments can also provide substantial savings.
The best practices that I have referenced can be
implemented at the State level, with or without Federal
legislation; however, to ensure a nationwide adherence and
maximum savings, a Federal approach, which would ensure a more
uniform and efficient policy course of action, should produce
increased Federal savings. Please be assured that we would be
happy to work with this committee toward passing and
implementing successful policies in this area.
Nonetheless, is essential to note that tremendous savings
from these vast practices can be dramatically curtailed with
the passage of legislation and international trade agreements
that will, if unchecked, disrupt the timely introduction of
new, affordable generic drugs. One such threat is embodied
within the certain provisions of a certain Bioshield II
legislation. GPhA supports some aspects of the proposed
legislation, such as the need for product-liability
protections, expanded tax credits, and FDA review of drug
applications, but GPhA remains opposed to unnecessarily
extending brand product monopolies for already approved drugs
which will do little to secure America and would allow brand
pharma to profiteer off the fears of Americans.
Another threat to the U.S. generic savings involves
attempts to use international trade agreements to limit the
timely introduction of generics in the United States. GPhA has
serious concerns about a number of provisions contained in free
trade agreements that the United States has originally
negotiated and is currently negotiating. It is GPhA's position
that no free trade agreement should upset the U.S. of
pharmaceutical innovation and access, nor should they block
generic drugs from being exported abroad.
And Mr. Chairman, I would be remiss if I left this hearing
without urging Congress to encourage the FDA to immediately
clear a pathway for generic biologics and issue important
industry guidelines. Generic biologics represents another
opportunity for additional, untapped consumer savings. We also
urge Congress to require sufficient FDA oversight and
accountability to ensure the timely introduction of generic
drugs. The return on investment from increased FDA oversight
and accountability regarding the generic drug approval program
would pay significantly in long-lasting dividends to all
Americans.
And finally, GPhA encourages Congress to encourage CMS to
complete its analysis on authorized generic drugs, products
that are masquerading as generics, with respect to the best
price calculation for brand companies and issue a policy
clarification on this matter.
And Mr. Chairman, I want to reiterate that the tools needed
to capture millions of dollars in savings in consumers exists
today. It is clear that generic pharmaceuticals already save
billions of dollars a year in prescription drugs costs. More
substantial drugs savings can be accompanying by adopting and
tightening best practices and remaining vigilant to those
special interests seeking on a national and international level
to erect barrier to the timely introduction of generic drugs.
But we can and we should do better so we can ensure that
healthcare and prescription drugs remain affordable for all
consumers. And with your help, I am confident we can, and we
will. And I will be pleased to answer any questions you may
have. Thank you.
[The prepared statement of Kathleen Jaeger follows:]
Prepared Statement of Kathleen Jaeger, President and CEO, Generic
Pharmaceutical Association
Mr. Chairman and Members of the Committee. I'm Kathleen Jaeger,
President and CEO of the Generic Pharmaceutical Association. Today I am
pleased to speak on behalf of nearly 130 member companies that
manufacture and distribute generic pharmaceutical products, including
bulk active pharmaceutical chemicals.
We appreciate the opportunity to discuss current generic
pharmaceutical utilization and the opportunities available to tap a
substantial reservoir of additional savings for consumers, as well as
for State- and Federally-funded programs. Because your committee has
such broad jurisdiction over our nation's health care programs,
including private insurers, Medicaid, and much of the Medicare program,
we well recognize your keen interest in and knowledge about the impact
of growing pharmaceutical cost on all purchasers of health care. GPHA's
recommendations for achieving substantial savings can be accomplished
by adopting initiatives in two broad categories:
1) Adopting initiatives that would increase generic utilization and
produce substantial savings; and
2) Preventing initiatives that would erect new barriers to generic
competition and thus increase overall cost.
First, I would like to provide a brief overview of the safety and
sameness of generic drugs as well as to discuss recent pharmaceutical
cost trends. For more than two decades, FDA-approved generic medicines
have been providing consumers with the same medicines, and offering the
same clinical results as their brand name counterparts at a substantial
savings for consumers.
The rigorous FDA-approval process for generics ensures that our
products have the same active ingredients, are taken in the same way,
provide the same dose, and produce the same clinical results.
Repeatedly since the founding of our industry, the FDA has assured the
general public, doctors and healthcare providers that the only
difference between a generic drug and its brand name counterpart is the
cost. Our products have been used to fill over tens of billion
prescriptions, a track record for safety and sameness that stands on
its own.
Generic pharmaceuticals represent more than 53 percent of all
prescriptions dispensed in the United States, but they account for only
12 percent of all dollars spent on prescription drugs. According to
various studies, generics can be as much as 80 percent less than
brands. And, according to the National Association of Chain Drug
Stores, last year the average retail price for a brand drug was $96.01
while the average retail price of a generic was $28.74, a savings of
nearly 70 percent per prescription.
It is important to note that while current generic utilization
saves America tens of billions of dollars each year on the cost of
medicines, increasing utilization will introduce even more dramatic
savings.
Recently, AARP released its annual Rx Watchdog Report, which tracks
prices that drug manufacturers charged wholesalers during the past year
for about 200 prescription drugs popular with older Americans. The
brand pharmaceutical price hikes were the largest annual jump since
AARP began sponsoring the study five years ago.
According to the report, the 7.1 percent hike continues a trend of
increasing brand drug prices, despite the fact that inflation in 2004
was 2.7 percent.
The report also noted that in contrast, the price for 75 popular
generic drugs hardly budged in 2004, rising 0.5 percent, 2.2 percent
below the rate of inflation.
The value of generic medicines as the prescription for relief from
high drug costs was further confirmed in a December 2004 study released
by the Department of Health and Human Services. While we believe the
number to be much higher, the HHS study found that in the United
States, ``if consumers were to buy generic products whenever possible .
. . we estimate savings to be approximately $17 billion.''
Clearly, greater use of generic pharmaceuticals could help arrest
the escalation of drug spending at both the federal and state levels,
and for individual consumers as well. Promoting the increased
utilization of generic drugs is therefore, quite simply, good and
affordable medicine for everyone.
Yet, as I indicated previously, there remain a number of
opportunities and threats to substantially enhancing the savings
potential that generic pharmaceuticals provide.
I. INITIATIVES THAT WOULD INCREASE GENERIC UTILIZATION AND PRODUCE
SUBSTANTIAL SAVINGS
Adopting or encouraging the use of practices that immediately
increase the use of FDA-approved generic pharmaceuticals in place of
expensive brand name drugs is imperative. In fact, a one percent
increase in generic utilization yields almost 4 billion dollars in
savings!! 1
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\1\ 2005 IMS Health: National Sales Perspective (2004 Data
Analysis) & IMS Health NPA
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One critical step that deserves immediate consideration by Congress
is the adequate funding and oversight of FDA's generic approval
division, the Office of Generic Drugs (OGD). Lack of sufficient
oversight and accountability at the Commissioner and Center levels,
allows generic applications to endure needlessly protracted legal and
scientific consults--delaying generic approvals for several months to
several years. Also, allocations for OGD have remained flat for the
past couple of years, and the result of this constraint on resources is
clear.
Today, when consumers need FDA-approved generic medicines more than
ever before, more than 700 applications languish due to lack of
resources at OGD. Cooperative efforts between our industry and the
staff of the Office of Generic Drugs have resulted in a streamlining of
the approval process and better generic pharmaceutical applications.
Yet, due to the lack of sufficient agency accountability and OGD
resource constraints, approvals significantly lag behind the
increasingly strong applications of our member companies. Moreover,
this problem will only worsen over the next few years as more generic
drug applications are submitted for equivalents of blockbuster brand
products that come off patent: $27 billion in 2007, $29 billion in
2008, $21 billion in 2009 and $44 billion in 2010.2
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\2\ Bain & Company.
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Congress can, and should, require accountability and increase
funding to support more timely approvals. The return on investment from
more accountability and increased funding will pay significant and
long-lasting dividends for all Americans--individual consumers,
employers and state governments and the federal government.
GPhA believes that there are a number of additional ways to
immediately and effectively increase generic utilization rates on the
national and state level, for Medicaid and other federal programs, for
state funded programs, and for private insurers and individual
consumers who must pay out of pocket.
While not all-inclusive, GPhA has identified several initiatives
that alone, or in combination, would help increase the utilization of
more affordable generic medicines. Four of these proposals involve
changes related to the way generic medicines are prescribed and
substituted. Three of our proposals address incentives and the value of
efficient cost management. One initiative focuses on the value of
education.
We also want to take the opportunity of this hearing to raise a
flag on several issues currently looming on the legislative and
international horizon that could derail America's leadership in safe
and effective affordable pharmaceutical products.
Let's look first at prescribing practices and generic substitution.
The easiest, and most immediate, place to start saving on prescription
medicines involves the often overlooked prescription pad, and physician
prescribing practices.
The format of a prescription pad varies from state to state. Yet,
this format can have a profound impact on whether physicians are more
or less likely to prescribe brands over generics. At least 33 states
require the physician to make a conscious decision and handwrite ``no
substitution'', ``dispense as written'' or a similar statement on the
pad if only a brand drug can be prescribed. Other states may have a
check-off box or require the doctor to sign on a different line if they
want the brand product dispensed and not a generic.
Encouraging states to simply redesign the prescription pad form
could provide tremendous savings to public and private healthcare
providers and consumers.
For example, before 2001 the State of Texas had a two-line
prescription pad where the physician could sign the ``brand only'' line
and override the substitution of a generic for the brand. In 2001,
Texas implemented a new pad that required a physician to handwrite
``Brand medically necessary'' in order to prohibit generic
substitution. According to an analysis by the University of Texas, this
simple change resulted in estimated savings of $223
million.3 If states were to adopt this type of approach,
which makes the dispensing of an expensive brand drug a proactive
choice by the physician, states would unlock a vast, untapped
opportunity for savings.
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\3\ May 2001, Center for Pharmacoeconomic Studies, University of
Texas at Austin
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We also believe that there are several additional ways to increase
usage of generic drugs, by strengthening the substitution process and
prescribing practices in favor of generic medicines where they are
available.
Next, we believe that the issues of requiring the substitution of
generics offer an untapped opportunity for savings. GPhA urges that
mandatory generic substitution policies be implemented where they do
not currently exist, and strengthened in states where loopholes may
lower overall substitution. As an example of savings, legislation
expected to be approved by the Tennessee Legislature that requires
substitution of generic drugs for more expensive brand drugs has been
projected by state officials to save $32 million for that Medicaid
program--$11.5 million in state funds and almost $21 million in federal
funds.
While the federal government may not want to specifically mandate
this at the state level, CMS could certainly assist in making a
compelling argument for states that do not have mandatory substitution.
While CMS has recently announced its support for mandatory generic
substitution policies, and most private entities already have embraced
this policy, more can be done to encourage adoption by the public
sectors.
GPhA would propose policies be implemented to ensure that that the
substitution of generic medicines, when available, cannot be overridden
without a valid medical reason.
For example, in Massachusetts, Medicaid officials took a series of
steps over the past three years that they estimate shaved $150 million
off the annual tab for drugs. A large part of the savings came from a
change in a policy within their mandatory generic substitution program
related to ``Dispense as Written.''
Massachusetts doctors were routinely asking for brand name drugs by
writing ``Dispense as Written,'' and Medicaid was paying $10 million to
$11 million a month for brand-name drugs that had generic equivalents.
After reviewing the situation, a tougher policy was put into place that
requires the doctor to explain why, in writing, and get permission from
the Medicaid program in order to force dispensing of a brand drug
instead of its equivalent lower-cost generic. Once the new policy went
into effect, spending on brand-name drugs with generic equivalents
dropped dramatically to $200,000 to $300,000 a month.4
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\4\ Tough Medicine is Paying of For State; Boston Globe; February
17, 2004
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Another issue closely related to mandatory substitution and
physician-prescribing practices involves a new version of the old
argument that generic drugs are not the same as brands. This argument
is appearing in the form of ``carve-outs'' for mental health,
epileptic, diabetic, arthritis, cancer and many other drug products.
Some states have instituted practices, supported by brand drug
special interests that make it extremely easy for physicians to bypass
generic drug substitution laws for mental health drugs. The rationale
for carve-out provisions is based on the erroneous assumption that the
use of generic drugs will undermine treatment outcomes of patients with
mental illness. There is no scientific or medical basis for this
assertion and it is inconsistent with FDA's determination of
therapeutic equivalence.
In the mental health category alone, there are currently more than
60 major mental health drugs on the market including anti-depressants,
anti-psychotics, anti-anxiety, and stimulants. Fifteen of the most
prescribed mental health drugs accounted for more than $18 billion in
brand name drug sales in 2001. Sales of anti-psychotics totaled $6.5
billion in 2003.
Simply stated, the ``carve-out'' policy is contrary to FDA's
pronouncement of therapeutic equivalence, and increases state Medicaid
program costs by millions of dollars without any credible, independent
evidence-based studies that indicate that using a brand drug will
result in a different outcome than using a generic.
To understand the cost of ``carve-outs'' one needs only to look to
the State of Florida. Two years after the state implemented a preferred
drug list with a carve-out for mental health drugs, an analysis by
state officials showed that the elimination of the carve-out could
provide substantial savings. And, less than two weeks ago, Florida
followed through by passing legislation to eliminate carve-outs ``aimed
at saving nearly $300 million a year.'' 5
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\5\ Advocates Also Point Out Concerns of Public Safety; The Tampa
Tribune (May 13, 2005). The law is due to go into effect, July 1st if
signed by the Governor.
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Other states that have rejected carve-outs have achieved
substantial savings without any impact on health outcomes. One year
after the state of Kentucky changed its policy to treat an anti-
psychotic drug like all other medications for the purpose of
substitution, ``mental health advocates said they could trace no ill
effects to the decision.'' 6
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\6\ States Try to Limit Drugs in Medicaid but Makers Resist; New
York Times; December 18, 2003.
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GPhA strongly encourages the modernization and strengthening of the
process by which substitution of a generic for a more expensive brand
product is encouraged.7
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\7\ May 2001, Center for Pharmacoeconomic Studies, University of
Texas at Austin
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There are also several additional issues related to pricing and
incentives that GPhA believes can help dramatically increase generic
utilization rates. These involve implementing aggressive maximum
allowable cost--or MAC--formulations, and providing an incentive for
pharmacists to dispense generics.
States have the flexibility to establish their own payment ceilings
for multiple source drugs, so long as it does not exceed the federal
payment ceiling for drugs. Slightly over half the states take advantage
of this cost containment tool, which enables them to limit their
liability with regards to drug pricing.
Many states have implemented MACs, or maximum allowable cost
formulations, for a limited number of drugs. And, while establishing
aggressive MACs is certainly a worthy objective, it is the rigorous
application of MACs to both brands and generics that can yield
substantial state savings. This is a common practice among private
health insurers that has resulted in significant savings for them.
Another opportunity for increasing generic utilization involves
incentive fees for pharmacists. Drug specific payment ceilings
calculated at the Centers for Medicaid and Medicare Services allow for
payment to pharmacists of a ``reasonable'' dispensing fee established
by the state Medicaid agency.
CMS regulations do not define ``reasonable'' and there is great
variation among states in the amount of the dispensing fee and the
manner in which it is calculated.8 Lots of states offer no
differential at all between the dispensing fee paid for brand-name
prescription drugs and generic drugs. Offering a higher dispensing fee
for generic drugs than brand drugs would encourages greater dispensing
of generic drugs at the pharmacy, thus saving scarce Medicaid dollars.
---------------------------------------------------------------------------
\8\ Ibid
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Finally, an area of virtually untapped opportunity for increasing
generic utilization involves the investment in consumer education
programs that address misinformation campaigns by brand companies as
well as misperceptions about the sameness and effectiveness of
generics. An aggressive effort to educate providers and patients can
result in substantial savings.
For example, AARP and Consumers Union have separately produced
extraordinarily useful and empowering information to consumers to help
them make the right decisions about choosing affordable medications.
There are other examples as well. The Generics First program initiated
by Medco Health Services demonstrates the impact that a generics
education program can have. In 2002, Medco sent pharmacists to hold
face-to-face clinical discussions with 1,700 physicians in 10 states.
In addition to the meetings, the pharmacists left patient education
materials and generic samples that physicians could provide to
patients. The effort focused on educating the physicians on the
availability, clinical benefits and economic value of generics and
encouraged their use as a first line treatment.9
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\9\ The Bergen County Record newspaper, November 5, 2002
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In addition, Express Scripts has implemented a program called
``GenericsWork'' that encourages physicians to prescribe, and patients
to ask for low-cost generics. It is supported by a communication and
education strategy targeted to both audiences. Express Scripts projects
savings of $25 million over 3 years per 100,000 lives.
According to published reports, at least six (6) states have
experimented with similar ``counter-detailing'' efforts. The Wall
Street Journal reported that in October 2000, a Florida ``counter-
detailer'' visited 88 physicians who tended to prescribe brand-name
anti-inflammatory drugs. An analysis of those physicians prescribing
habits three months later showed a change in prescribing that was
expected to save Florida $196,000 a year.10
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\10\ The Wall Street Journal, August 22, 2001
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West Virginia launched a pilot ``counter-detailing'' program in
2002. The head of West Virginia's Public Employee Insurance Agency
predicted at the outset that a 2 percent increase in generic
utilization (from 43 percent to 45 percent) would save his state $1
million.11
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\11\ The Washington Post, August 5, 2002
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GPhA has developed a consumer educational campaign designed to
maximize awareness of generics. It focuses on the core message that
generics are the same medicine, provide the same results, but at lower
cost than brand name drugs. This educational program can be made
available and distributed directly, or indirectly, and customized to
suit any health care provider's needs. For example, a state could
partner with GPhA or merely use the materials as they have been created
to support generic product use and patient acceptance within their
program--without the cost of developing such a campaign on their own.
GPhA stands ready to assist in implementing such educational
programs in both the federal and state levels, as well as with
employers, providers, insurers and physicians and pharmacists.
Another tremendous opportunity of untapped savings is in the area
of biopharmaceuticals. Biologics are growing at almost twice the rate
of total pharmaceuticals. There are more than 600 biotech drugs
currently in phase II and III clinical trials. And marketed biologics
are approximately $30 billion in U.S. Sales, 12% of total
pharmaceuticals, and growing about 20% annually. They could reach $60
billion in sales by 2010.
Acting Commissioner Dr. Crawford addressed the issue of
biogenerics. Dr. Crawford stated that ``[w]e now have the science to
fashion a generics biologics program,'' and the agency has ``to put a
system in place to deal with it.'' GPhA couldn't agree more. The
opportunity of additional savings is only a few steps away. We urge
Congress to demand that FDA: (1) issue guidance documents to provide
further advice to industry participants; and (2) approve generic
applications that have scientific sign off. And finally, we urge
Congress to encourage FDA to immediately establish a clear, definitive
flexible pathway for generic biopharmaceuticals.
II. PREVENTING INITIATIVES THAT WOULD ERECT NEW BARRIERS TO GENERIC
COMPETITION AND THUS INCREASE OVERALL COST
Ensuring that federal and international legislation as well as
trade agreements do not disrupt the level playing field is necessary
for the continued, timely introduction of affordable life-saving
generic drugs.
These threats to savings are contained in such initiatives as
attempts to use bioterrorism preparedness as a vehicle for brand
product monopoly extensions; and efforts to utilize international trade
agreements to restrict the development and timely approval of generics
in America
For the past year, Congress has been exploring ways to expand and
improve BioShield I. Senators Joseph Lieberman, Orrin Hatch and Sam
Brownback introduced the Project BioShield II Act of 2005 to further
improve America's security. While this legislation includes several
promising incentives, it also includes provisions that would
dramatically increase health care costs for consumers and the federal
government and deliver windfall profits to brand pharmaceutical
companies.
While GPhA supports efforts to encourage the production of
countermeasures, some aspects of this legislation threaten the economic
viability of our health care system. Outrageous measures to extend
brand monopolies like 'wild cards' and overly generous patent
extensions will delay consumers' access to affordable medicines.
For nearly 20 years, such special interest measures have been
soundly rejected by Congress as catering to special interests at the
public's expense. Yet, they have now resurfaced in legislation intended
to strengthen America's security.
The bill contains promising incentives, such as needed product
liability protections, expanded tax incentives, and fast track FDA
review of drug applications, which GPhA supports. But as the
legislation currently stands, it rewards de minimis product
modifications of already approved products and discourages ``true''
innovation. Simply put, it allows brand pharma to play off Americans'
fears to extend their product monopolies and keep affordable medicines
off the market. Accordingly, this legislation is little more than a
blank check to the brand pharmaceutical industry.
GPhA remains opposed to:
The overly broad definition of a countermeasure, which could be
extended to already approved products. Because the legislation
fails to limit the term to novel medicines--ones that are
clinically superior and fill a security priority void--patent
extensions could be applied to a wide range of already approved
drugs.
Extending data exclusivity up to 10 years.
Unlimited and uncapped patent extensions on any countermeasure
product. Under this bill, multiple patents claiming the brand
product could be extended.
``Wild card'' provisions that could be applied to any product in a
company's portfolio, thus providing a windfall to brand
pharmaceutical companies for products wholly unrelated to
bioterrorism.
Rather than providing the brand industry with enormous windfalls,
GPhA urges Congress to strengthen BioShield by adding incentives for
``true'' research priorities and incentives that don't jeopardize the
nation's healthcare system.
Another threat to U.S. generic savings involves attempts to use
international free trade agreements to limit the timely introduction of
generics in the United States.
GPhA remains active on the international level, to ensure that
harmonization efforts and treaties do not raise new barriers to the
introduction of affordable medicines in the U.S., or make it difficult
for generic companies to compete in the international arena.
Specifically, GPhA has serious concerns about a number of
provisions contained in Free Trade Agreements (FTAs) that the United
States has recently negotiated with various trading partners, including
Australia, Bahrain, Chile, Morocco and Singapore, and potentially may
be negotiated with Andean, SACU, ASEAN and other countries.
Some FTA provisions regarding intellectual property and other
measures involving pharmaceuticals appear to contradict, both
explicitly and in spirit, commitments made by the United States in the
World Trade Organization and several appear inconsistent with U.S. law.
GPhA is concerned that such measures could block generic drug exports
abroad, substantially delay the timely access of affordable
pharmaceuticals in those territories, and create the means to delay
generic competition here at home, such as through international
harmonization measures.
It is GPhA's position that no Free Trade Agreement should be used
as a means to facilitate the brand industry's strategic global
objectives of unfairly extending drug market protections and destroying
the U.S. balance between pharmaceutical innovation and access.
GPhA will continue to monitor these issues, while focusing efforts
on those initiatives that will help boost generic utilization and lower
costs to the federal and state governments, to employers, insurers and
all consumers.
In summary, it is clear that generic pharmaceuticals already save
tens of billions of dollars a year in prescription drug costs. It is
also clear, that with substitution at approximately 53 percent, there
is still much room to grow America's utilization of generic drugs.
Ensuring the long-term growth in generic drug savings will result
from Congress requiring FDA accountability and providing OGD with the
resources necessary to free the logjam of new generic product
approvals, by increasing the appropriations necessary to adequately
fund the Office of Generic Drugs.
Additional increases in drug savings will come from changes to
prescribing practices. Some of this growth can be accomplished by
tightening existing substitution mechanisms. Additional growth can be
accomplished by providing incentives for the increased use of generics.
Some of this growth can come from educating consumers about the safety
and sameness of generic medicines.
And finally, ensuring affordable generic pharmaceuticals for
American consumers in the future will require that we remain vigilant
to those special interests seeking, on a national or international
level, to erect barriers to generic competition by unfairly extending
market protections under the guise of bioterrorism preparedness, or by
using international treaties to delay competition from America's
generic pharmaceutical industry in the name of international
harmonization.
America's generic industry is working right now to lower
prescription drug costs. Prescriptions are being filled right now, one
out of every two, with lower cost generics. But we can, and should do
better, so we can ensure that health care and prescription drugs
remains affordable for all consumers.
Thank you.
Mr. Deal. Thank you. Dr. Berger?
STATEMENT OF JAN BERGER
Ms. Berger. Good afternoon. My name is Dr. Jan Berger, and
I am the Chief Clinical Officer for Caremark RX, Incorporated.
As you may know, Caremark is a leading pharmacy benefit-
management company that provides comprehensive drug services to
over 2,000 health plan sponsors throughout the United States.
Our clients include employers, health plans, managed care
organizations, insurance companies, unions, and government-
employee programs, including the Federal Employees' Health
Benefits Program. Caremark operates a national retail pharmacy
network of over 59,000 participating pharmacies and seven mail
service pharmacies. We process over 55 billion prescriptions
each year on behalf of our beneficiaries.
I would like to thank the chairman for calling this hearing
today on generic prescription drugs. Our company has been
creating and implementing programs to promote generics as an
effective alternative to expensive, brand-name prescriptions
for years. The Congressional Budget Office estimated that in
2002, generic drugs enabled savings of almost $100 billion
versus the cost of the equivalent brand name prescriptions.
Promoting the use of generic drug alternatives is a key factor
in helping to control the total prescription drug costs in the
U.S. market. This is particularly relevant as the first
outpatient drug benefit in the Medicare program is implemented
in January.
As you know, the FDA ensures that generic medications
maintain the same high standards of safety, strength, quality,
and effectiveness as brand-name medications. Based on the FDA
guidelines, the only difference between brand-name and generic
drugs are their name, appearance, and price. You may wonder
then, why doesn't everyone use generic drugs? There are many
outside influences that work against the average consumer's
choice to use generic drugs. The most obvious are the lack of
awareness of safe and available generic options, the competing
visibility of brand names, the stereotype that generics are
inferior, and the lack of motivation by both patient and
physician due to benefit-plan-design structure and physician
sampling. However, we believe that one once beneficiaries
understand that generics are safe and effective, they will be
interested in the fact that generic drugs can save them money.
Caremark has developed and operates a wide range of
programs that help patients take advantage of generic drugs. By
increasing the dispensing of generic drugs, health plans
typically realize a savings of 30 to 70 percent, compared to
the use of the more expensive brand-name drugs. How do we do
it? We work to educate patients, physicians, and pharmacists
about safe and effective generic options, both concurrently and
retrospectively, and we work to design health plan structures
that encourage the choice of generics.
Many of our programs are patient-oriented so that patients
themselves are encouraged to use the generics. These include
educating the patient on availability, safety, and
effectiveness; educating the patient about their own potential
cost savings; and working within the plan design to motivate
patients to consider generics. Numbers of studies have shown
that lower out-of-pocket costs for a patient result in greater
compliance with their prescription drug regimen, so because
generics are less expensive to the participant, typically, they
are able to take them more continually--increased adherence--
and have better health outcomes.
In addition to Caremark's programs to educate beneficiaries
of our generics, Caremark also assists prescribers in choosing
generic drugs because they have the power of the pen. Specific
activities here include face-to-face physician consultation
through our National Academic Physician Detailing program, and
through drug utilization review or DUR letters, physician
feedback and peer comparisons, and utilizing tools that help
identify generic opportunities and help eliminate the hassles
of generic prescribing such as difficult drug names and
spellings. Our programs operate both at the retail and mail
order level in order to encourage physicians to consider
generic options when writing prescriptions.
Of course, the final decision of dispensing a brand-name
drug or a generic always rests with the prescribing physician.
We believe that widespread usage of electronic prescribing--or
e-prescribing--could assist physicians in the dispensing of
generics. We are working the commercial market in order to
encourage our health plans and employers clients to employ e-
prescribing programs with providing physicians with either
handheld or web-based technologies. Provisions included in the
Medicare Drug Benefit law will ensure that Medicare beneficiary
physicians will have access to patient-specific formulary
information and will be able to greater discuss generic drugs
options at the point of care, rather than at the pharmacy
counter. Greater use of e-prescribing program will not only
increase generic utilization, but are likely to improve safety
by reducing medication errors.
Pharmacists are the third group we work with in order to
find opportunities to increase generic utilization. We do this
through online communication at the point of sale to alert a
pharmacist to potential generic dispensing opportunities;
pharmacist feedback and peer comparisons; and in some cases,
monetary incentives are provided, based at least partially on
the efforts to improve generic drug substitution and dispensing
rates.
Caremark understands the value of generics and will
continue to promote their appropriate use. Our efforts with
patients, prescribers, and pharmacists, as well as the efforts
of others in the industry have paid off. Generic drug
utilization has increased. In 2004, across Caremark's client
base, the overall generic-substitution rate was 95.1 percent.
This means that over 95 percent of the time that a prescription
was dispensed for a prescription drug with a generic equivalent
available, a generic option was actually dispensed.
I do, however, wish to bring to your attention a
legislative issue that could prove counterproductive to all of
the work that Caremark and others have been doing to increase
the use of generics. We recognize that Congress is actively
pursing Bioshield II legislation that would enhance
manufacturers' ability to bring bioterrorism countermeasures to
market. We commend these efforts, but are concerned that in
doing Congress will unintentionally enact legislation that will
inhibit the production of generic drugs. Specifically, we urge
Congress to remove all of the patent-extension provisions for
brand-drugs as they consider this important legislation. While
we are supportive of tax incentives and limitations of
liability for manufacturers, we believe these protections
should be sufficient incentives for companies to invest in the
production of biomedical countermeasures.
Patent-restoration and wildcard extensions for brand-name
pharmaceuticals are not in the best interest of healthcare,
patients, State and local governments, or private payers. The
end result will be higher prescription drug bills for all
concern and potentially reduced access to necessary healthcare.
A rough estimate of cost of the extending of patent life of the
top ten selling drugs for 2 years was over $45 billion. We
strongly urge the House, when considering Bioshield II, to
eliminate all patent-extension provisions.
In conclusion, Caremark is committed to delivering high
quality healthcare services, and we believe one of the more
important, clinically safe and effective cost-containment
techniques is the promotion of generic drugs. I thank the
committee for asking me to speak about our business practices
today and look forward to an ongoing dialog with you, Mr.
Chairman, and the members of this committee.
[The prepared statement of Jan Berger follows:]
Prepared Statement of Jan Berger, Chief Clinical Officer, Caremark
INTRODUCTION
I would like to first thank the Committee for calling this hearing
today on generic prescription drugs. Our company has been creating and
implementing programs to promote generic as an effective alternative to
expensive brand name prescription drugs for years. Caremark is pleased
that the Congress is interested in the health care improvement and cost
savings opportunities that are represented by generics.
I am a physician and the Chief Clinical Officer for Caremark. At
Caremark I am responsible for the physician oversight of the Caremark
corporate clinical strategy, support of sales and account management,
governmental and lobbyist activities, Medicare Part D, product
development, disease management and technology initiatives including:
e-prescribing and Internet activities. I am a board certified
pediatrician with clinical experience in private, managed care and
academic medicine.
Caremark appreciates the opportunity to offer testimony on generic
prescription drugs. Generic drugs represent a cost effective
alternative to expensive brand name prescription drugs. By making this
cost effective alternative available to patients, patient adherence to
therapy increases, clinical outcomes are improved and healthcare costs
are reduced. We commend the Energy and Commerce Subcommittee on Health
for considering this very important issue. Based on its many years of
experience in managing the pharmacy benefits for tens of millions of
Americans, Caremark is pleased to be able to offer its comments and
recommendations.
I will touch on three major points in my testimony to you today.
First, I will explain how Caremark and the pharmacy benefit management
(PBM) industry generally promotes generic drug utilization. Second, I
will discuss some of the challenges we face in trying to increase
generic utilization, and the efforts Caremark has made to increase
consumer and provider awareness of generic drugs. Third, I will
identify some of the more significant federal policy barriers we see to
increased utilization of generic drugs.
CAREMARK RX INC. AND THE IMPACT OF GENERIC PRESCRIPTION DRUGS ON OUR
MARKET
Caremark Rx, Inc. (Caremark or ``the company'') is a leading
pharmacy benefit management (PBM) company, providing through its
affiliates comprehensive drug benefit services to over 2,000 health
plan sponsors and their plan participants throughout the U.S.
Caremark's clients include employers, health plans, managed care
organizations, insurance companies, unions, government agencies,
including the Federal Employees Health Benefits Program (FEHBP),
CalPERS, and other funded benefit plans. Caremark operates a national
retail pharmacy network with over 59,000 participating pharmacies,
seven mail-service pharmacies, the industry's only FDA-regulated
repackaging plant, and 21 licensed specialty pharmacies for the
delivery of specialty medications to individuals with chronic or
genetic diseases and disorders. Caremark processes over 550 million
prescriptions annually.
THE PROMISE OF GENERIC DRUGS
The Congressional Budget Office (CBO) estimated that in 2002 the
selection of generic drugs enabled savings of almost $100 billion vs.
the costs for the equivalent brand name prescriptions. In addition, as
blockbuster brands are losing their patent protection, more generic
drugs are being introduced to the market every year. Every generic drug
introduction is an opportunity to increase generic drug utilization.
Promoting the use of generic drug alternatives is a key factor in
helping to control total prescription drug costs in the U.S..
Prescription drug spending grew at an annual rate of 10.7 percent from
2002 to 2003, reaching 11 percent of total national health spending in
2003. 1 If generic drug alternatives are introduced into the
market, current brand name drug prices decline. A recent report
indicated that ``prices decrease 30 percent during the first 6-12
months after a generic drug enters the market, during which time only a
single manufacturer may produce the generic, after which the price may
decrease by as much as 70 percent when other generic drug competitors
enter the market''.2
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\1\ Cynthia Smith et al. ``Trends: Health Spending Slows in 2003''.
Health Affairs, Volume 24, Number 1. January/February 2005.
\2\ Milne, Christopher-Paul and Catherine Cairns. ``Generic Drug
Regulation in the US Under the Hatch-Waxman Act''. Pharmaceutical
Development Regulation 2003; 1(1). Tufts Center for the Study of Drug
Development, Tufts University.
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In an environment where health care costs are on the rise, it is
vital that the cost savings available from increase generic drug
utilization be realized. This is particularly relevant as the first
outpatient drug benefit in the Medicare program is implemented January
1, 2006. Policy makers and industry stakeholders will want to ensure
that there is an appropriate balance between quality of care delivered
and effective cost-containment strategies, such as generic drug
utilization.
The FDA ensures that generic medications maintain the same high
standards of safety, strength, quality, and effectiveness as brand name
medications. Since generic drugs contain the same active ingredients in
the same amounts as brand drugs, they're just as safe and just as
effective. In fact, the two versions are equal in strength and perform
the same way within the body. Through strict regulations and scrutiny,
the FDA ensures these similarities. That means, beyond the name,
generic drugs and brands are therapeutically equivalent and
bioequivalent.3
---------------------------------------------------------------------------
\3\ Therapeutically Equivalent: Two drugs are considered
therapeutically equivalent if they can be expected to produce the same
clinical effect with the safety profile.
Bioequivalent: Acting on the body with the same strength and
similar bioavailability as the same dosage of a sample of a given
substance. Use of differing formulations of a drug or chemical
compound. Two drugs are considered bioequivalent if they contain the
same active pharmaceutical ingredient and if there is no significant
difference in the rate, and extent to which, the products are absorbed
in the human body under similar experimental conditions, when
administered at the same dose. See Food, Drug and Cosmetic Act, 21
U.S.C. 505(j)(8)(B).
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Based on FDA guidelines, the only differences between brand name
and generic drugs are their name, appearance and price. By law, generic
drugs must look different from their brand name counterpart: what is
sold as a blue pill from the brand manufacturer might be sold as a
white pill from the generic manufacturer. And, because generic drugs
can have multiple competitors and don't carry the high costs of
research and advertising, they can be sold at a much lower cost.
Prescription generic medication essentially is the same as the brand
name drug in everything but name. That is why generic drugs are such a
great value for patients and health plans, patients can receive the
same medication, just as safe and just as effective as the brand, for a
much better price. In short, the promise of generic drugs is equal
effectiveness and lower costs.
Based on Caremark's experience in managing drug benefit programs in
a wide variety of settings, we can say unequivocally that one of the
simplest and most effective ways to control drug costs while
maintaining high quality care is to increase the use of generic, as
compared to brand, medications by patients. For example, generic drugs
introduced over the last three years alone reduced total drug costs for
Caremark's health plan clients in 2003 by 3.1 percent. By increasing
generic drug substitution, health plans typically realize a savings of
30-70 percent compared to use of the more expensive brand-name drugs
Caremark's programs to increase generic utilization have two main areas
of focus:
Education--Empower and educate the physicians and patients about the
safety and effectiveness, as well as lower cost, of generic
drugs through proactive, concurrent and retrospective programs.
Plan Design--Structuring the plans designs to encourage the use of
generic drugs.
In addition to patients and physicians, the dispensing pharmacist
is also an important decision-maker with regards to generic drug
dispensing. Caremark recognizes this and works with our network
pharmacies in a variety of ways to maximize the potential value for our
clients and their members from generic drugs. These include on-line
communications at the point of sale that alert a pharmacist to
potential generic drug dispensing opportunities, financial incentives
for pharmacies to dispense generic drugs rather than more costly brand
alternatives, and extensive analytic and reporting tools to further
help pharmacies recognize and maximize generic dispensing
opportunities.
RAISING AWARENESS
Why doesn't everyone use generic drugs? There are many outside
influences that work against the average consumer's choice to use
generic drugs. The most obvious are:
Awareness: Many patients are simply unaware that generic drugs are
just as safe and just as effective as their brand name
counterparts. They may also be unaware that a generic drug
exists for the prescription they are filling. And they may not
know they can ask their doctor or pharmacist for the generic
version.
Visibility: Blockbuster brands have a strong marketing presence
through direct-to-consumer advertising, while prescription
generics do not.
Mistaken Identity: People often associate the term ``generic'' with
lower quality (e.g., ``Brand X'' generic paper towels). In the
case of generic drugs, ``generic'' simply means a non-branded
prescription medication.
Motivation: If patients pay nearly the same co-pay for a brand name
drug and a generic drug, then there's little reason for them to
choose the generic. Creating a pharmacy plan that clearly
distinguishes the economic or financial benefits of using
generic drugs will motivate patients to learn more about and
use generic drugs.
Physician Focus: It's often easier to prescribe, pronounce and spell
a brand name drug name (e.g., Dyazide) than a generic one
(hydrochlorothiazide/triamterene). The priority for physicians
is the clinical care of their patients; drug costs are
secondary. Studies have found that approximately 23 percent of
physicians could correctly identify the price of common
prescription medications. While, physicians aren't directly
impacted by the actual cost of brand medications; they do,
however, receive brand samples and substantial marketing and
sales attention from brand name drug manufacturers.
Powerful Patents: The patents for many brand name drugs are vigorously
defended even after the protection period is over. Brand
manufacturers often try to extend their patents and exclusivity
periods to protect their product from competition by generic
drugs. Sometimes brand manufacturers create new formulations or
``me-too'' variations to the original brand to divert attention
from the generic drug.
These issues affect patients in their homes, at the physician's
office, and at the pharmacy. They can influence decisions about what
drugs are dispensed. These are major forces that influence rising drug
costs today.
Hence, Caremark's patient education programs focus first on safety
and effectiveness. Perhaps the biggest obstacle to the use of generic
drugs is the perception that generic drugs are inferior. Patients need
to know that they aren't sacrificing anything--quality of care or
safety or effectiveness--by using generic drugs. Only then will they be
interested in the second message: generic drugs can save them money.
CAREMARK'S FOCUS ON INCREASED GENERIC DRUG UTILIZATION
Caremark promotes the use of generics through several different
programs. These programs focus on three key audiences: patients,
physicians and pharmacists.
Patient Programs--Patients are encouraged to use generics
through: (1) educational programs and (2) plan designs that create an
economic incentive to use generics.
1. Educational Programs--These include general mailing that explain
what generics are, and how patients can save money without compromising
their care by choosing generics. They also include patient-specific
mailings based on identifying retail brand name prescriptions dispensed
when there was a generic drug available. In this case, Caremark will
then a mailing to the patient in cases where the patient requested the
prescription to be filled with a brand when a generic was available.
2. Plan Design--There are many ways to encourage generic drug
utilization through plan design. Some of the ways to do this include:
Adjusting co-pay differentials to be higher for more expensive brand
name drugs
Requiring patients to obtain explicit physician authorization in
order to receive brand name dispensing when an approved generic
product is available.
Requiring that patients accept generic products or pay the difference
in price between the brand name and generic drugs, in addition
to the standard co-payment.
Educational Mailings--Caremark will identify retail brand name
prescriptions dispensed when there is a generic drug available,
and will then send mailings to the patient in cases where the
patient requested the prescription to be filled with a brand
when a generic was available.
Prescriber Programs--In addition to Caremark's programs to educate
patients about generic drugs, Caremark also assists prescribers to
choose generic drugs.
Caremark's physician education programs focus on promoting
appropriate and cost-effective prescription utilization. Specific
program activities include physician education via retrospective DUR
(drug utilization review) letters, physician profiling and report
cards, and face-to-face physician consultation through our national
academic physician detailing program. These activities provide
physicians with current clinical and economic information on
pharmaceutical products and treatment protocols within specific
therapeutic classes, including utilization of generic drugs. Some of
these programs are described in greater detail below:
Under Caremark's physician profiling program, a report is sent to
physicians identifying claim-specific examples of brand
products that could be converted to a generic drugs. Physicians
will then be given patient-specific opportunities to prescribe
a generic product. Twice a year, Caremark also produces a
report showing the physicians' generic substitution rate (GSR)
compared with peers in their specialty and against other
physicians in the Caremark book of business. The report also
shows the top five multisource brands where substitutions did
not occur. Physicians may request a list of their patients who
have been prescribed the multisource brand.
Under the Caremark CustomCare Mail program DAW (Dispense as Written)
prescriptions for brand name drugs are identified at Caremark's
mail service pharmacy. A Caremark clinician contacts the
prescribing physician to ask the physician to consider
converting the prescription to a generic drug substitute and to
educate the physician on the value of generic drugs. The final
decision to dispense a brand name drug or generic substitute
always rests with the prescribing physician. Caremark is
successful in 45 percent of cases when requesting that
physicians convert DAW prescriptions to a generic product.
Caremark clinicians analyze and identify certain therapeutic
categories that may include clinically similar drugs. Through a
clinical pharmacist review, physicians are contacted and
educated around the Caremark pharmacist's clinical
recommendations. Caremark will then ask the physician to
prescribe the generic alternative if clinically appropriate.
This is done prior to filling at Caremark's mail service.
Retail DAW mailings: Caremark will identify retail brand name
prescriptions dispensed when there is a generic drug available,
and will then send mailings to the physician who requested the
prescription to be filled with the brand-name version of the
prescription drug. Mailings educate the recipient on the
safety, efficacy, and value of generic drugs, and on the
actions they can take to have the next prescription filled as a
generic drug.
Generic Therapeutic Interchange at retail: Caremark clinicians
identify certain therapeutic categories that may include
clinically similar drugs. If a drug does not have a generic
drug alternative, Caremark will send communications to the
physician to consider prescribing a generic drug within the
same class for the next prescription.
Lastly, one of the most vital programs that will assist in the
dispensing of generics by physicians is the use of electronic
prescribing (e-prescribing). E-prescribing will allow for a
better dialogue between physicians and their patients about the
range of prescription options available by providing physicians
with instant access to patient-specific formulary information,
and the medication histories of their patients.--This will
allow physicians to discuss generic drug options at the point-
of-prescribing rather than having these issues addressed only
after the fact at the pharmacy counter or later. The
requirement for Medicare drug benefit plans to implement an e-
prescribing program will go a long way towards encouraging the
widespread use of e-prescribing in the commercial market ``by
setting uniform federal standards that can be adopted by all
participants in the health care system. This will, in turn, not
only, encourage a better doctor-patient relationship, improve
safety by reducing medication errors but also increase the
utilization of generic drugs.
Pharmacy Programs--Clinical pharmacy management programs alert
pharmacists to opportunities to substitute generic drugs. These
programs are employed both before and after a prescription is
dispensed. Some of these programs are described below:
Caremark's claim adjudication systems automatically identify when a
brand name drug has a generic drug equivalent. The pharmacist
will dispense the generic drug alternative, provided the
physician has not written ``Dispense as Written'' (DAW). Retail
pharmacies are given monetary incentives based, in significant
part, on their efforts to improve our clients' generic drug
substitution and dispensing rates. They improve performance in
these areas by their own dispensing decisions and by
influencing patients and physicians to use the most cost-
effective, clinically appropriate medications. Individual
pharmacists are not paid fees tied to performance results.
The MAC (maximum allowable cost) program is an effective tool to
promote utilization of generic drugs. The MAC program
encourages generic drug substitution at the pharmacy level by
establishing a ceiling price on the amount reimbursed to
pharmacies for specific multisource brand-name and generic drug
products. Pharmacy reimbursement is limited to the MAC price
for drug products on the MAC list, and so pharmacies will
retain more of the reimbursement if they dispense the less
costly generic product. This creates a strong incentive for the
pharmacy to dispense a generic drug.
Caremark helps pharmacies contain costs for patients and health
plans by providing pharmacies with reporting tools for evaluating and
improving their own performance and that identify missed opportunities.
Pharmacies can access their own data electronically via downloadable
spreadsheets in weekly e-mails and through other electronic media. This
reporting enables pharmacies to drill down to the store level and view
important cost-containment data, including generic drug substitution
and generic drug dispensing rates, as well as comparisons with other
pharmacies within each state.
OPPORTUNITIES FOR INCREASED USE OF GENERIC DRUGS--CONGRESS AND THE FDA
Caremark understands the value of generics and will continue to
promote their appropriate use. Our historical efforts with
beneficiaries, physicians and pharmacies and in support of health plan
sponsors that we have described, as well as the efforts of others in
the industry have paid off. Generic drug utilization has increased. In
fact in 2003, across Caremark's entire client base, the overall generic
substitution rate (GSR) was 94.8 percent. This means that about 95
percent of the time that a prescription was dispensed for a
prescription drug with a generic equivalent available, a generic option
was actually dispensed.
While generic substitution rates are over 90 percent, the generic
dispensing rate, that is the percentage of total prescriptions
dispensed that are generic, is only between 40-50 percent. Therefore,
the greatest opportunity today to increase the savings realized from
generic drugs lies not in increasing the rate of dispensing a generic
drug when a generic drug is available, but instead, in increasing the
availability of generic drugs generally. The more generic drug products
that are available, the greater the overall rate at which pharmacies
and PBMs like Caremark can dispense generic drugs. Increasing the
availability of generic drug alternatives is the key to increasing
overall generic drug utilization.
There are many factors that create barriers to the availability of
generic drug alternatives. Some of these barriers can be addressed by
Congress, and we urge the Congress to take action to reduce or
eliminate these barriers so that lower cost generic drugs can be
brought to market more quickly thereby, lowering overall health care
costs to the American consumer.
The following sections outline three areas where Caremark believes
Congress' actions can and will significantly affect generic drug
utilization in the future:
1. First, the Medicare Modernization Act of 2003 made changes to the
Hatch-Waxman Act to close perceived loopholes that allowed
brand manufacturers to extend their patents beyond the time
originally intended and deemed appropriate by Congress. We
encourage Congress to continue these efforts in order to ensure
that generic manufacturers have a level competitive playing
field with brand name manufacturers.
2. Second, we urge Congress and the FDA to move forward on a regulatory
process that leads to the approval of generic biologics as an
alternative to brand name biologic products. This is truly the
next frontier generic drug products and progress in this area
should improve the affordability and accessibility of these
very important, but expensive products.
3. Third, we ask that as Congress considers Bioshield II legislation
that would enhance manufacturers' ability to bring bioterrorism
countermeasures to market more quickly, it not unintentionally
enact legislation that will inhibit the production of generic
drug by. increasing the protections against market competition
already enjoyed by brand manufacturers. This would serve as a
major disincentives for generic drug manufacturers to make
cost-saving generic products available to the American public.
the hatch-waxman act: change in the medicare prescription drug,
improvement, and modernization act of 2003 (mma)
In 1984, Congress passed the Drug Price Competition and Patent Term
Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act.
Title I of the Act sought to reduce the time it took for generic drugs
to enter the market through the creation of an abbreviated new drug
application (ANDA) process. For the first time, generic manufacturers
did not need to repeat the preclinical and clinical research and trials
that must be conducted by brand manufacturers before obtaining FDA
approval. Generic pharmaceutical manufacturers instead needed only to
show that their product was bioequivalent to the brand name product.
Caremark supports the intent of the 1984 Hatch-Waxman Act to
encourage greater consumer access to lower-priced generic alternatives.
However, over time, brand name manufacturers have found loopholes in
the Act that allow them to extend their patents beyond the initial
period, thereby frustrating the purpose of the law and delaying the
introduction of generic drugs to market.
In 2003 Congress took an important step towards the promotion of
generic drug competition with the changes to Hatch-Waxman enacted by
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (MMA). Under the new law, a brand name manufacturer no longer can
receive 30-month stays for patents that are submitted to the FDA after
an ANDA has been submitted for that product. In addition, the MMA
included a modification to the start date of the 180-day exclusivity
period that ensures that it is not used up in patent disputes.
We believe that the changes to Hatch-Waxman Act under the MMA are
steps in the right direction. However, there is still work to be done
in order to ensure that the Hatch-Waxman Act removes all barriers that
exist to increased competition and generic drug availability.
GENERIC BIOLOGICS
When the provisions of the Hatch-Waxman Act were drafted, the
biotechnology market was in its infancy. Since then, biotechnology and
patent approvals for biotechnology products have grown rapidly. The
growth in this market has recently caused policymakers and industry
leaders to consider making generic alternatives to the brand versions
of these biologic products available to consumers. This is particularly
relevant now, given that 18 biologic products worth $10 billion a year
will lose patent protection over the next few years.4
---------------------------------------------------------------------------
\4\ Milne, Christopher-Paul and Catherine Cairns. ``Generic Drug
Regulation in the US Under the Hatch-Waxman Act''. Pharmaceutical
Development Regulation 2003; 1(1). Tufts Center for the Study of Drug
Development, Tufts University.
---------------------------------------------------------------------------
Biologic drugs tend to be very expensive, and in a time of rapidly
growing prescription drug costs, it is important that biogeneric
alternatives be considered to help create a more competitive, lower
cost market. Similar to conventional drugs, when a generic version of a
biological product becomes available, the market can be expected to be
more competitive, and Caremark anticipates that it will be better able
to negotiate discounts and offer those products at a lower cost to
consumers and payers.
Biotechnology and Specialty Pharmacy
Specialty pharmacy is a significant component to Caremark's overall
service offering. Most of the specialty products that Caremark offers
to consumers are biologic drugs. In contrast to conventional drugs,
which are chemically synthesized from small molecules, many biologics
are synthetic or recombinant versions of natural biologic substances
such as proteins and enzymes that often require specific handling and
storage techniques.
Caremark believes that the development of a streamlined FDA
regulatory approval process for follow-on biologics would greatly
increase generic product competition. We believe it is critical that
the FDA use the administrative tools it has at its disposal to allow
biogeneric alternatives to enter the market. In addition, we encourage
Congress to create a legislative solution in areas where the FDA does
not have administrative authority to do so, or is not using its current
administrative authority due to concerns about legal interpretation.
Promote Regulatory Process to Approve Generic Biologics
To date, the FDA does not approve most therapeutic biologics
through the new drug application (NDA) process, which is used to
approve most drugs. There are however, several therapeutic biologics
such as insulin and growth hormones that have, by exception, been
approved via the NDA process.
Biologics are generally approved separately, under the biologics
license application (BLA) process, which is authorized under the Public
Health Service Act (PHSA), not the Food, Drug and Cosmetics Act (FDCA)
(which governs the NDA and ANDA processes). The BLA does not contain a
process similar to the ANDA, which would expedite the approval of
generic biologics. To date, the FDA has not made any administrative
changes to either the BLA or the NDA/ANDA process to approve generic
biologics.
Caremark encourages the FDA or Congress to move forward with an
administrative process which would speed the availability of generic
biologics to American consumers. We believe this could be done in one
of two ways: 1) the FDA or Congress could create one approval process
for biologics and pharmaceuticals, thereby allowing generic biologics
to enter the market through the ANDA process; or 2) create an expedited
approval process within the PHSA for generic biologic, similar to what
was created under the Hatch-Waxman Act.
We understand that the FDA has publicly stated that the Agency has
limited administrative authority to create a process whereby generic
biologics may be approved. If the FDA continues to take this position,
we encourage Congress to take action in order to address the issue.
Bioequivalency
One of the most significant barriers to biogeneric approval is
demonstrating the bioequivalence of these products. Progress is being
made daily to better understand how to analyze and evaluate the
clinical evidence that will prove bioequivalence. According to public
comments from the FDA, significant progress is being made at the Agency
to promote the development of bioequivalence evaluation tools,
including molecular imaging techniques, in-vivo sampling methods,
pharmacodynamic measures and mathematical models that test the
performance of inhalation drugs.5
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\5\ http://www.fda.gov/oc/speeches/2005/GPhA0301.html
---------------------------------------------------------------------------
We believe that the science around bioequivalence testing has
evolved to the point where the FDA should begin considering accelerated
generic approvals of bioequivalent products. We believe the time is now
ripe for the FDA and Congress to take action to ensure that this
science and technology is harnessed to bring to market lower-cost
biogeneric alternatives.
BIOSHIELD AND THE IMPACT ON GENERIC PHARMACEUTICALS
BioShield I shows commitment to bio-preparedness
The enactment of BioShield I (P.L. 108-276) in July of 2004 was a
defining moment in the nation's commitment to bio-preparedness. Clearly
there is a need to develop new countermeasures for protection against
the bioterror pathogens, toxins, or infectious diseases that
potentially could be targeted against the United States.
Since the passage of BioShield I, some policy makers have raised
concerns about the limitations of BioShield I, especially in dealing
with the reluctance of pharmaceutical manufacturers to engage in
research and development of biomedical countermeasures. Without public
demand or appropriate incentives to spur countermeasures production
today, the market for these products may not develop quickly enough.
Several bills have been introduced, that aim to strengthen
BioShield I by giving the federal government tools to collaborate with
private companies in developing countermeasures, thereby ensuring that
the nation is more adequately prepared for potential bioterrorism
attacks. One such bill, BioShield II (S. 975) would allow the Secretary
of the Department of Health and Human Services (HHS) to deploy a
variety of additional incentives, including the ``wild-card'' patent
extension.
The wild-card patent provision
In general, under a ``wild-card'' patent provision, a brand name
manufacturer may receive an incentive of additional market exclusivity
on any drug, including non-countermeasure drugs and blockbuster drugs,
for which it holds an unexpired patent. Specifically, as contained in
S. 975, the Secretary of HHS would have the discretion to grant a
manufacturer, who has won a BioShield contract, a wild-card patent
extension ranging from six months to two years, for any qualified
product the company manufactures upon successful development of a
biomedical countermeasure. If you consider the just ten top selling
brand names drugs that could be certified, the cost of this provision
for the US buyers of prescription drugs, including consumers,
especially seniors and the disabled and health plan sponsors, such as
the federal government, exceed $45 billion.
Wild-card incentives delay generic drug competition
While Caremark supports some of the other incentives, such as tax
incentives and liability protections, to encourage more pharmaceutical
companies to participate in bioterrorism countermeasure, we strongly
urge that Congress not pass legislation that includes protectionist
patent-related incentives such as the ``wild-card'' provision. Such
incentives will delay or even prevent generic drug competition for
brand drugs, thereby undermining the balance so carefully achieved
under Hatch-Waxman. By delaying the entry of generic drugs to the
marketplace, these incentives would unnecessarily restrict access to
less expensive versions of safe, effective and much needed medications,
thereby burdening consumers, government, and private insurers with
higher prescription drug bills.
While S.975 would require that the Secretary consider, among other
things, the impact of the patent extension on consumers and healthcare
providers in deciding whether to grant the wild-card extension, we are
concerned that in some cases the urgent need for countermeasure
development may seemingly outweigh the potential harm of extending the
patent rights on a non-countermeasure drug. However, attempting to
promote one public policy goal (security) by sacrificing another
(access to affordable health care) through anti-competitive
protectionist measures is not in the nation's interest, and not an
appropriate tradeoff.
BioShield II patent incentives would propagate uncertainty in the
generic drug marketplace
Under S. 975, all manufacturers who successfully produce the
contracted countermeasure, including those that are awarded the wild-
card extension, have the option to instead elect for full-term patent
restoration on the countermeasure to compensate for time lost during
the regulatory review process. In fact, at any time a contracting
manufacturer granted the wild-card extension may choose the
countermeasure patent restoration option instead of the wild-card, but
the manufacturer may only choose one option. It could take five years
or more for a successful countermeasure to be delivered, due to the
time needed for research and development, during which time the patent
on the selected wild-card drug may expire. The ability of a
manufacturer to name a wild-card drug but never invoke the provision
would significantly impact generic manufacturers, who would be deterred
from developing a generic version of the selected wild-card drug due to
the threat of litigation and liability for treble damages. As a result,
American consumers, health insurers, and the prescription drug plans
soon to be offering the new Medicare Prescription Drug benefit would
have potentially fewer generic drug alternatives from which to choose,
thereby increasing healthcare costs and eliminating treatment options
for Americans.
BioShield II proposes to waive Hatch-Waxman limits on patent term
restoration
S. 975 goes beyond the patent term restoration options under
existing law, which allow only a fraction of the patent term lost
during the approval process to be restored. It would allow the entire
delay associated with regulatory review to be restored. This provision
could allow the firm with a winning countermeasure drug to choose to
extend the life of the patent on the new product to its full 17 years.
Extending the life of brand name patents for this period of time is an
unnecessary boon to brand manufacturers that will come at the price of
the American consumer, as it will seriously inhibit generic drug
manufacturers from bringing new generic products to market, thereby
reducing the availability of lower cost generic products to consumers.
Congress should encourage the countermeasure and generic drug markets
The ability of the Federal Government to offer sufficient
incentives to large pharmaceutical companies to invest substantial
amounts of private capital towards the development of biomedical
countermeasures--a relatively underdeveloped marketplace for research
and development--is clearly important to the safety and security of our
nation, but should not come at the expense of reduced generic drug
options and therefore, reduced access to necessary health care.
Caremark continues to support the acceleration of research,
development and manufacturing of novel biomedical countermeasure
agents. Tax incentives and limitations on liability should be
sufficient incentives for companies to invest in the production of
biomedical countermeasures. Patent restoration and wild-card extensions
are not in the best interest of the American people, generic
pharmaceutical manufacturers, pharmacy benefit management companies,
and the country's healthcare system at large.
CONCLUSION
Caremark is committed to delivering high quality health care
services to American consumers. We provide, through our affiliates
comprehensive drug benefit services to over 2,000 health plan sponsors
and their plan participants throughout the U.S. One of the most
important, clinically safe and effective, cost containment techniques
that we employ as a PBM is the promotion of generic drug utilization
through educational offerings, pharmacy programs and plan benefit
design strategies. By encouraging generic drug utilization, we are able
to offer safe and effective drugs at lower prices to consumers.
I thank the Committee members for asking me to speak about our
business practices to promote appropriate utilization of generic drugs
today, and look forward to an ongoing dialogue to determine how to
increase the promotion and utilization of generic products in the
future. I also appreciate the opportunity to raise legislative and
administrative policy issues that could affect the ability to
efficiently and expeditiously bring generic prescription drugs to
market. Again, I commend the Committee for considering this very
important issue and look forward to further discussion and policy
development in this critical area.
Mr. Deal. Thank you, ma'am. Ms. Cramer?
STATEMENT OF BONNIE M. CRAMER
Ms. Cramer. Mr. Chairman and member of the committee, I am
Bonnie Cramer, a member of the all-volunteer AARP Board of
Directors. Thank you for the opportunity to testify today.
Americans of all ages need access to affordable
prescription mediations. Generic drugs have an important role
in helping to control drug costs. Recent AARP studies reveal
that generic drug prices, which are traditionally less
expensive, are not rising as fast as their brand-name
counterparts. Brand-name prescription drug prices to continue
to rise much faster than the rate of inflation. The use of
generic drugs is steadily increasing, but more needs to be done
to ensure the availability of these lower-cost alternatives.
For instance, the patent life of innovator dugs should not
be unnecessarily extended, and once the patent on the innovator
drug has expired, generic drug manufacturers should not be
hindered by unnecessary litigation and other efforts to extend
patent protection beyond what true innovation deserves. In
addition to generally being less expensive, generic drugs are
also a safe alternative to brand-name drugs. For an
overwhelming majority of individuals, generic drugs can be
substituted for the brand-name equivalent drug. However, in a
few cases, an individual may not react the same to a generic
drug as they would to its brand-name counterpart. For example,
some individuals may be allergic to inert ingredients included
in the generic drug. AARP supports the use of generic drugs
whenever possible, but we also believe that physicians must
retain the ability to override generic substitution where
medically appropriate. In addition, individuals should not be
penalized financially when the generic drug is not medically
appropriate. Any formulary override should be conducted with as
little burden on a physician and patient as possible.
Americans are becoming increasing familiar with generic
drugs, but we need to do more to educate consumers and
physicians about the benefits of generic drugs. In 2002, AARP
launched a nationwide Wise-Use campaign to promote the
appropriate use of generics. This campaign included print and
broadcasts ads and a brochure entitled ``Before You Take Your
Medicine, Take This Advice'', which we developed with the
American Pharmacist Association and distributed in pharmacies
nationwide. This year, AARP is taking that campaign further by
unveiling a drug-safety and effectiveness reference tool on
AARP webpage.
Generic drugs offer most Americans the same therapeutic
value as brand-name prescriptions drugs, but at a more
affordable price. We urge Congress to do more to ensure that
Americans have access to lower cost generic drugs as part of a
broader agenda to bring down the rising cost of prescription
drugs. Thank you, again, for inviting us here, and I am happy
to answer any questions you may have.
[The prepared statement of Bonnie M. Cramer follows:]
Prepared Statement of Bonnie M. Cramer, AARP Board Member
Mr. Chairman and members of the Committee, my name is Bonnie
Cramer. I am a member of AARP's Board of Directors. On behalf of our
over 35 million members, thank you for convening this hearing and for
including AARP in your discussions about the use of generic
prescription drugs.
In November, millions of older Americans and those with
disabilities will have the opportunity to choose to enroll in a long-
overdue Medicare prescription drug benefit. Medicare coverage of
prescription drugs will ensure that beneficiaries can afford necessary
medications. However, even with the addition of this new benefit, more
needs to be done to keep overall drug costs down. Generic drugs have an
important role to play in helping to control drug prices for
beneficiaries, the Medicare program, and for the entire health care
system.
RISING DRUG PRICES
High prescription drug prices are taking a toll on our health care
system--both the public and private sectors. Employer-sponsored health
care premiums are rising at double digit increases, 1 in
large part due to increasing prescription drug costs. As a result of
rising health care costs, more employers are dropping coverage, thus
increasing the number of uninsured Americans. There are currently more
than 45 million Americans who lack health care coverage and these
individuals pay the highest prices for their prescription drug needs.
Many choose not to fill prescriptions because they cannot afford to pay
for them. A recent AARP survey showed that among Americans age 50 and
older, one in four said they decided against filling a prescription;
cost was reported to be the main deterrent.2
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\1\ Kaiser Family Foundation and Health Insurance and Educational
Trust, Employer Health Benefits 2004 Summary of Findings.
\2\ Prescription Drug Use Among Midlife and Older Americans, AARP,
January 2005.
---------------------------------------------------------------------------
Rising prescription drug prices continue to squeeze public programs
at both the state and federal level. In 2003, the federal government
spent $25.2 billion on prescription drugs for public
programs.3 Prescription drug spending in the Medicaid
program increased at an average annual rate of 17--percent between 2000
and 2003.4
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\3\ Centers for Medicare and Medicaid Services, Expenditures for
Health Services and Supplies Under Public Programs, by Type of
Expenditure and Program: Calendar Year 2003, available at http://
www.cms.hhs.gov/statistics/nhe/historical/t10.asp (noting that of this
amount $5.3--billion was non-Medicaid dollars and $19.9--billion
represented Medicaid spending on prescription drugs).
\4\ John Holohan and Arunabh Ghosh, ``Understanding the Recent
Growth in Medicaid Spending, 2000-2003,'' Health Affairs, Jan. 26, 2005
at W5-52.
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GENERIC DRUGS CAN ACHIEVE SAVINGS
Brand name prescription drug prices continue to rise at rates that
are increasingly unaffordable for the average American. A recent AARP
study revealed that, on average, pharmaceutical manufacturer prices for
the 195 brand name drugs most widely used by older Americans increased
at more than double the rate of general inflation from 2000 through
2004.5 The average annual increase in manufacturer prices
charged to wholesalers and other direct purchasers for these drugs was
7.1 percent in 2004, up from 4.1 percent in 2000. For the 153 brand-
name drugs that were in the market for the entire five year period,
this translates into a cumulative average price increase of over 35
percent, over two-and-one-half times the general inflation rate of 13.5
percent over the same period.
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\5\ Trends in Manufacturer Prices of Brand Name Prescription Drugs
Used by Older Americans, 2004 Year-End Update, AARP Public Policy
Institute Data Digest #DD112, April 2005.
---------------------------------------------------------------------------
In contrast, generic drug prices are lower than brand name
prescription drugs, and more interestingly, manufacturers' prices on
generic drugs are not rising as fast as their brand name counterparts.
A recent AARP study revealed that, on average, manufacturer list prices
for the top 75 generic drugs most widely used by older Americans rose
0.5 percent in 2004 compared to a 13.3 percent average increase in
2003.6 This average annual increase was less than one-fifth
the rate of general inflation for 2004.
---------------------------------------------------------------------------
\6\ Trends in Manufacturer Prices of Generic Prescription Drugs
Used by Older Americans, 2004 Year-End Update, AARP Public Policy
Institute Data Digest #DD113, April 2005.
---------------------------------------------------------------------------
GENERIC DRUGS CAN BE A SAFE ALTERNATIVE
In addition to generally being less expensive, generic drugs are
also a safe alternative to brand name drugs. In order to gain Food and
Drug Administration (``FDA'') approval to market a generic drug, a
manufacturer must demonstrate that the generic drug is bioequivalent to
the comparable brand name prescription drug. To prove bioequivalence,
the generic drug manufacturer must demonstrate two things. First, that
the generic drug is pharmaceutically equivalent, in other words that it
has the same active ingredients, strength, dosage, and method of
administration as the brand name pharmaceutical. Second, the
manufacturer must prove that the generic drug has comparable
bioavailability, meaning that the generic drug must have the same rate
and extent of absorption as the brand name pharmaceutical.
Nearly all generic drugs are expected to be bioequivalent to their
brand name counterparts (e.g., ``A''-rated generic drugs). For an
overwhelming majority of individuals, these generic drugs can be safely
substituted for the brand name equivalent drug. However, in a few
limited cases, generic drugs may not meet the standards of therapeutic
equivalency. These ``B''-list drugs should not be substituted for the
brand name drug.
There is documented evidence that suggests that for a small number
of individuals, generic substitution may not be appropriate. For
example, some individuals may be allergic to inert ingredients (e.g.,
coating) included in the generic drug. Therefore, AARP believes that
prescribers must retain the ability to override generic substitution in
cases when the prescribing physician has deemed such substitution to be
medically appropriate (e.g., individual does not respond well to the
generic drug treatment regimen).
Thus, a critical component of any drug formulary or preferred drug
list that promotes use of generics is an efficient and effective
exceptions process. Such a process should provide prompt access to a
brand name or other appropriate drug whenever--based on sound clinical
evidence provided by the prescribing physician--the generic is not
medically appropriate for an individual patient. Equally important is
ensuring that, whenever such exceptions are granted, the patient is not
charged more for obtaining a medically appropriate drug. Furthermore,
individuals who are granted such exceptions should not be required to
go through the exceptions process again once it has been established
that the generic is not medically appropriate for them.
ACCESS TO GENERIC DRUGS
Use of generic drugs is steadily increasing. In 2001, generic drugs
accounted for nearly half of all retail prescription drugs dispensed in
the United States, up from 18.6 percent in 1984.7 In 2003,
generic drug prescriptions represented 43 percent of all prescriptions
written, and 47 percent of new (non-refill) prescriptions.8
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\7\ Generic Drugs Research Report, AARP Public Policy Institute,
publication IB61, May 2003.
\8\ IMS Health, 2004.
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In 1984, Congress passed the Drug Price Competition and Patent Term
Restoration Act, commonly referred to as the Hatch-Waxman Act, which
helped speed generic drugs to market. Unfortunately, brand name
pharmaceutical manufacturers have often tried to circumvent the Hatch-
Waxman Act. Brand name pharmaceutical manufacturers facing loss of
patent protection on blockbuster drugs began using litigation and other
means to extend the life of patents. Courts and the Federal Trade
Commission (``FTC'') have determined that some brand name prescription
drug manufacturers colluded with generic drug manufacturers to delay
the marketing of competing generic products. The first generic version
of a brand name drug to establish that it does not infringe on a valid
patent receives a 180-day period of market exclusivity. Therefore,
stopping or delaying market entry of the first generic drug prohibited
all other generic drugs from competing, thus extending the brand name
manufacturer's market exclusivity.
In another effort to extend the life of their patent protections,
brand name manufacturers have also used the practice of
``evergreening,'' the process of extending the patent protection of a
brand name prescription drug as the term of the original patent nears
expiration. One common method of evergreening is the ``late-file
patent'', whereby brand name manufacturers change a small aspect of
their drug (e.g., color, new dosage requirements, tablet shape) prior
to the expiration of the patent and then obtain a new patent based on
the ``improvements'' to the drug.
Evergreening blocks generic competition in at least two ways.
First, after the slight change results in the granting of a new patent,
the brand name manufacturer heavily promotes the ``new'' formulation as
being much better than the old and creates enormous demand for the
``new'' product for which it can charge monopolistic prices. Thus, the
market demand moves to the new expensive product even though there is
little science-based evidence that the old product, for which generics
may now be available, is inferior.
Second, brand name manufacturers used the late filed patents to
manipulate the automatic 30-month stay of generic competition granted
by Hatch-Waxman when the generic manufacturer notified the FDA that it
would like approval to market a generic version of a brand name drug.
The thirty months stay was designed to allow time for a court to
resolve whether the generic infringes the brand name manufacturer's
patent. But, after the first stay based on an older patent of a
particular drug was resolved in favor of the generic, the brand name
manufacturer then would file another suit against the generic based
upon a later-filed patent on the same drug. This gave the brand name
manufacturer another automatic 30-month stay preventing the generic
manufacturer from bringing its drug to market until that patent issue
was resolved. Brand name manufacturers were filing multiple challenges
in order to extend their patent life. The Medicare Modernization Act of
2003 (``MMA''), bans this form of evergreening by limiting brand name
pharmaceuticals to a single automatic 30-month stay.
Pharmaceutical innovation plays an important role in prolonging the
life and improving the quality of life for individuals. Pharmaceutical
manufacturers are rewarded for their innovations in the form of patents
and FDA-granted market exclusivity on their products. However, the
patent life of these innovator drugs should not be unnecessarily
extended. Once the patent on the innovator drug has expired, generic
drug manufacturers should not be hindered by unnecessary litigation and
other efforts by the patent holder to extend patent protection beyond
what true innovation deserves. There have been eleven successful
challenges to patent laws brought by generic drug manufacturers; these
challenges have provided over $27--billion in savings.9
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\9\ Generic Pharmaceutical Association's testimony to the HHS Task
Force on Drug Importation, April 5, 2004.
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Pharmaceutical companies that engage in actions to unnecessarily
extend the life of their patent do so because holding the patent yields
significant income for the company every year. However, this money is
generated by individuals and health care payers. If generic drugs were
brought to market in a timely manner, this could reap significant
savings for the health care system in this country. AARP opposes patent
extensions or extensions of market exclusivity.
In addition to bringing generics to market in a timely manner, the
U.S. health care system can reap significant savings by investing
heavily in the research of comparative clinical effectiveness of
prescription drugs. Unlike in other countries, the U.S. does not
require that drugs coming onto the market test better than drugs
already available in the marketplace. Funding of comparative clinical
effectiveness studies would provide scientifically based information on
the relative clinical effectiveness of different prescription drugs. In
some cases the newer drug may be the best treatment option, in other
cases the best treatment option may be the generic drug already on the
market. Armed with this information, individuals and their prescribers
can make better treatment decisions.
CONSUMER EDUCATION
Although Americans are becoming increasingly familiar with generics
drugs--a recent AARP study showed that 97--percent of respondents say
they have heard about generic prescription drugs 10--some
confusion about the benefits of generics still exits. Twenty-four--
percent of respondents indicated that generic drugs were different from
brand name drugs, and among those who thought there was a difference,
only four in ten believed generic drugs to be less effective.
Surprisingly, overall only 21--percent of respondents believed generic
drugs to be less expensive than brand name prescription drugs.
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\10\ Prescription Drug Use Among Midlife and Older Americans, AARP,
Jan. 2005.
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More education is needed to help consumers and physicians
understand the benefits of generic drugs. Physicians generally support
generic substitution,11 but they also report frequent visits
by brand name pharmaceutical manufacturer representatives, which can
influence their prescribing behavior. Consumers also need to be aware
that direct-to-consumer (``DTC'') advertising often steers them towards
brand name prescription drugs when a less costly generic and/or a less
costly brand name drug may be available. Some DTC advertising is
beneficial--such as advertising that raises awareness about certain
diseases and/or conditions. However, the pharmaceutical industry spends
billions of DTC advertising dollars to promote ``new'' formulation of
products, which may show little improvement over less costly
alternatives already available in the marketplace.
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\11\ Physicians' Attitudes and Practices Regarding Generic Drugs,
AARP, March 2005 (reporting that 78--percent of respondents support
generic substitution in most cases, 17--percent support generic
substitution in all cases where the generic drug is available, and only
5--percent do not support generic substitution).
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In April 2002, AARP launched a nationwide ``Wise Use'' campaign to
promote the appropriate use of generic medicines. The campaign urged
consumers to inform their doctor or pharmacist about all other
medicines they were taking; to follow their physician's advice about
exactly how to use their medicine properly; and to resist being
pressured by direct-to-consumer pharmaceutical advertising to request
an inappropriate or possibly unnecessary medicine. The campaign
included print and broadcast ads, and a brochure, ``Before You Take
Your Medicine, Take This Advice,'' developed with the American
Pharmaceutical (now ``Pharmacists'') Association, distributed in
pharmacies nationwide.
This year, AARP took its education campaign further by unveiling a
drug safety and effectiveness reference tool at http://www.aarp.org/
health/comparedrugs. Based on the Drug Effectiveness Review Project
conducted at the Oregon Health and Science University, AARP helps
consumers compare the clinical and economic benefits of various drugs
within common therapeutic categories. We urge consumers to review this
information and, if applicable to their medical condition, to discuss
it with their physician or other health care professional.
CONCLUSION
Generic drugs offer most Americans the same therapeutic value as
brand name prescription drugs, but at a more affordable price. We urge
Congress to do more to ensure that Americans have access to lower cost
generic drugs as part of a broader agenda to bring down the rising cost
of prescription drugs. AARP appreciates the opportunity to testify and
we look forward to working with this Committee and Congress to help our
members--and all Americans--understand the wise and safe use of generic
drugs.
Mr. Deal. Thank you, ma'am. Dr. Perry?
STATEMENT OF BRUCE C. PERRY
Mr. Perry. Chairman Deal, Congressman Brown, and
distinguished subcommittee members, I am Bruce Perry, a family
physician, geriatrician, and Medical Director of Kaiser
Permanente, Georgia Region. I am here today on behalf of Kaiser
Permanente.
Timely access to generic drugs is central to our effort to
provide high quality and affordable prescription drug benefits.
This year, Permanente physicians will prescribe nearly $3
billion worth of drugs. The very close partnership between our
pharmacists and physicians allows us to use generic drugs very
effectively. While just over 50 percent of prescriptions in the
U.S. are written for generics, we write about 70 percent. Last
year, Americans spent more than $250 billion on prescription
drugs. Improved generic providing could save billions of
dollars, money that could be spent on other healthcare services
such as prevention or simply saved.
Safety and effectiveness underlie all of Kaiser
Permanente's pharmacy services. Let me offer you one example.
Cox-2 inhibitors are used to treat pain and inflammation. Cox-
2s were believed to reduce significant gastrointestinal side
effects of other pain relievers, including bleeding. They have
never been seen as superior pain relievers, compared to
ibuprofen, for example--although heavy advertising may have led
many patients to believe so. Stanford scientists showed the
Cox-2s potential to improve safety was limited to patients at
high risk of serious bleeding, less than 5 percent. They
developed a scoring tool to determine which patients would
benefit. Once Kaiser Permanente adopted this tool, our
physicians prescribed Cox-2s about 5 percent of the time. Until
the recent withdraws of Vioxx and Bextra, Cox-2s were
prescribed by other physicians approximately 50 percent of the
time. Aggressive promotion meant that patients were at
increased risk for heart attacks and higher spending. If the
use of Cox-2s in the U.S. had been the same as Permanente
physicians, last year, Americans would have saved more than $4
million or almost 2 percent of all drug spending. Promoting
greater use of generics can not only save money; it can be a
lot safer for our patients.
Kaiser Permanente's programs do not deny access to brand-
name drugs. Our goal is to prescribe those drugs to those
patients who really need them. The result is better quality and
lower costs. Our program works for four reasons. First, our
physicians and pharmacists, themselves, develop and implement
our pharmacy program. Second, our physicians have the latest
information about alternative drug therapies. Third, Permanente
physicians know they will not be penalized for prescribing non-
formulary or expensive brand-name drugs. Indeed, they know that
their patient can get them if they need them. Finally,
Permanent physicians know that the savings from their efforts
willower member premiums or enable them to provide other care.
Physicians are clamoring for better information about
comparative clinical effectiveness of prescription drugs.
Thanks to your work, AHRQ has begun comparative clinic-
effectiveness studies. This year, Congress appropriated $15
million for this. While modest, it is an important first step,
one that should be seen as an investment in better care and
lower spending. I encourage you to strongly support increased
funding for this vital research in this and future years.
Mr. Chairman, thank you for the invitation to testify. I
will be glad to answer any questions.
[The prepared statement of Bruce C. Perry follows:]
Prepared Statement of Bruce C. Perry, Executive Director, The Southeast
Permanente Medical Group on Behalf of the Kaiser Permanente Medical
Care Program
Chairman Deal, Congressman Brown, and distinguished Sub-committee
members, I am Dr. Bruce Perry, a family physician and geriatrician and
Medical Director of The Southeast Permanente Medical Group, which
together with Kaiser Foundation Health Plan of Georgia make up Kaiser
Permanente's Georgia Region. I also serve as Chairman of the Executive
Committee of the Permanente Federation, the umbrella organization that
coordinates national activities of the eight Permanente Medical Groups.
I appreciate the opportunity to testify here today on the important
subject of access to generic drug therapies. Timely access to high
quality generic drugs is central to Kaiser Permanente's efforts to
provide high quality and affordable prescription drug benefits.
I am testifying today on behalf of the national Kaiser Permanente
Medical Care Program. Kaiser Permanente is the nation's largest
integrated health care delivery system. We provide comprehensive health
care services to more than 8.4 million members in our 8 regions,
located in 9 states 1 and the District of Columbia. In each
Region, the nonprofit Kaiser Foundation Health Plan enters into a
mutually exclusive arrangement with an independent Permanente Medical
Group to provide all medical services required by Health Plan members.
---------------------------------------------------------------------------
\1\ California, Colorado, Georgia, Hawaii, Maryland, Ohio, Oregon,
Virginia and Washington
---------------------------------------------------------------------------
In our organization, virtually all pharmacy services are provided
directly in Kaiser Permanente facilities by Health Plan employed
pharmacists. This year, Permanente physicians will prescribe and Kaiser
pharmacists will dispense more than $3 billion worth of prescription
drugs. Our physicians and pharmacists make their best efforts to ensure
that our members receive the highest possible quality and most cost-
effective pharmaceutical care based on the best and most current
available clinical evidence. This is supported by a strong culture of
cooperation and collaboration between our medical groups and our
pharmacy program.
It is this very close partnership between the pharmacy operations
team of our Health Plan and the physicians of the Permanente Medical
Groups that allows Kaiser Permanente to experience very high levels of
use of generic drugs. While the Generic Pharmaceutical Association
reports that 53 percent of prescriptions in the United States are
written for generic drugs, approximately 70 percent of all
prescriptions written by Permanente physicians nationally are for
generic drugs. More than $250 billion was spent by or on behalf of US
patients in 2004 for prescription drugs. There is no question that
improved generic prescribing by US physicians has the potential to save
many billions of dollars--money that can be spent on other health care
services or newer drugs, or simply saved, slowing the growth of overall
health care spending.
We expect that our pharmaceutical costs will increase annually in
excess of the overall inflation rate. How much more than the inflation
rate is the real question. We acknowledge that increased pharmaceutical
utilization can in well-defined instances improve health and/or reduce
spending on hospital and medical services that drugs make unnecessary.
Overall, however, it is true that rising drug spending increases
overall health care costs. Capturing the value of prescription drugs,
and avoiding waste, is enhanced by the effective use of generic drugs.
DETERMINING THE PREFERRED DRUGS FOR KAISER PERMANENTE MEMBERS
At Kaiser Permanente, we take very seriously our obligation to
deliver the highest quality care to our members. As with virtually all
other health plans, each Kaiser Permanente region establishes a
formulary that includes a list of drugs that are preferred as first-
line therapies. The formulary is established by a regional
pharmaceutics and therapeutics (P&T) committee.
Our P&T committees are comprised of Permanente physicians from a
broad range of medical disciplines and the regional pharmacy services
director. When a new drug becomes available to treat a particular
condition, or when a review of existing drug therapies is undertaken,
the P&T committee is commonly aided by physicians with expertise in the
appropriate specialty.
When a new blood pressure medicine becomes available, for example,
a panel of cardiologists and internists will make recommendations to
the P&T committee. Their recommendations will reflect the latest
information on all drugs in the therapeutic class as presented in a
monograph prepared for the P& T committee by our pharmacist-staffed
drug information service. The drugs included on the preferred drugs
lists are those that, first and foremost, evidence indicates are
clinically superior to the other drugs in the therapeutic class. If the
preferred drug is available as a generic, the generic version will
virtually always be the preferred drug on the formulary. Along with
formulary-consistent prescribing by Permanente physicians, this
explains in large part why Kaiser Permanente has been so successful in
using generic drugs.
Opportunities Presented by High Quality Generic Drugs
I would like to discuss three examples that illustrate how Kaiser
Permanente uses generics to match clinical excellence with cost savings
opportunities when they are available in a class that contains many
drugs. While it is true that drugs that recently received FDA approval
sometimes provide additional value for patients in terms of reduced
side effects or greater efficacy, it is difficult to measure that value
because only very rarely do brand name pharmaceutical manufacturers
conduct head-to-head studies to assess whether newer drugs really are
better than other available drugs. Independent head-to-head comparative
research is also rare. However, one general observation can be made--
many, if not most, patients can be successfully treated with available
generic drugs. If these drugs fail to achieve the desired therapeutic
outcome, a newer drug can be prescribed. This is particularly true when
what was originally a breakthrough drug becomes available as a generic
drug, and the follow-on alternatives are still under patent.
Antidepressants
A good example is Prozac and follow-on antidepressants known as
selective serotonin reuptake inhibitors or SSRIs. When Prozac, now
generically available as fluoxetine, first came to market in the late
1980s, it was generally accepted as a breakthrough over the older
tricyclic antidepressants. While probably no more effective than the
older, existing drugs, the much less onerous side effects of Prozac
meant that patients were much better able to tolerate Prozac and
continue therapy. As a result, this became the drug of choice for a
proportionately large number of patients with clinically diagnosed
moderate depression.
In the years that followed, competitors in the class of SSRIs,
Paxil (paroxetine), Zoloft (sertraline), Celexa (citalopram), and line
extensions and follow-on versions of all of these (weekly Prozac,
extended release Paxil, Lexapro (escitalopram)) became available,
providing a panoply of choices for clinicians in a pharmacological area
where the first treatment, whatever is selected, may not be successful.
It is important to note that, while SSRIs have somewhat different side
effects profiles, none of these drugs appear to have meaningfully
different performance as the first drug in the class prescribed to a
patient. In other words, no one really knows whether a patient will
succeed on the first choice, no matter what the first choice is.
Today, high quality generic versions for Prozac, Paxil and Celexa
are available. As a result, it is possible to start virtually all
patients (except for those with a known sensitivity to or a side effect
from a particular drug) on any one of the generic alternatives before
attempting therapy on drugs that are still under patent. An appropriate
strategy like this, which is implemented in all Kaiser Permanente
regions, enables Permanente physicians to offer our patients both high
quality therapy and lower copayments (generic copayments are generally
lower than those for brand name drugs). By reserving the patented
alternatives for those patients who truly need them, we are able to
keep drug costs, and employer and individual premiums that are directly
related to those costs, down.
We estimate that our regional ``Fluoxetine First'' programs, which
are approved by all of our Regional chiefs of psychiatry, save Kaiser
Permanente members over $100 million annually in drug costs nationally,
compared to broader U.S. prescribing patterns. If all U.S. prescribing
of these drugs for new patients requiring antidepressants matched that
of Permanente physicians, there would be savings of well into the
billions of dollars annually with no reduction in clinical quality.
Cox-2 Inhibitors and other Nonsteroidal Anti-inflammatory Drugs
Cox-2 inhibitors (such as Celebrex, Vioxx and Bextra) represent a
type of non-steroidal anti-inflammatory drug (NSAID) that have been
used to treat the pain and inflammation that comes with various forms
of arthritis. It was believed that Cox-2 inhibitors would provide an
advantage over older NSAIDs (like ibuprofen and naproxen) because they
were presumed to cause significant gastrointestinal side effects, which
can include bleeding from gastrointestinal ulcers. They have never been
considered superior pain relievers, although heavy promotion of these
drugs may have led many patients to believe they are. We now know that
high doses of these drugs represent a significant cardiovascular risk
for patients and as of today, two of the three Cox-2s, Vioxx and
Bextra, have been removed from the market. Caution dictates that
physicians should reserve the remaining Cox-2 inhibitor, Celebrex, for
those patients who fail on traditional NSAID therapy and do not have
significant cardiovascular risk factors.
Even before the early hints of serious cardiovascular risk were
confirmed and widely accepted by the medical community, work done by
scientists at Stanford University showed that the potential
gastrointestinal safety benefit of Cox-2 inhibitors was largely limited
to patients who were at high risk of serious gastrointestinal bleeding
from traditional NSAIDs. This was important because they found that
fewer than five percent of patients are actually at high risk of
serious gastrointestinal side effects.
In a very practical response to these data, the same scientists
developed a scoring tool to apply to patients who were candidates for
NSAIDs to determine their risk levels. Kaiser Permanente, with the
enthusiastic support of our Regional chiefs of rheumatology and
internal medicine, adopted this scoring tool to provide physicians with
simple, automated methods to know the risk levels of the patients they
were seeing. Once this scoring tool was implemented, Permanente
physicians prescribed Cox-2 inhibitors for Kaiser members less than
five percent of the time when NSAID therapy was necessary. Until the
recent withdrawal of the two Cox-2s, among the rest of the US
population, these drugs were being prescribed approximately 50 percent
of the time. The lack of good independent, credible information for
physicians about the limited clinical role for these medicines combined
with ubiquitous promotion to patients and physicians meant that
millions more patients than necessary were prescribed them, and
billions of dollars in needless drug expenditures resulted.
We estimate that in 2004 alone, if U.S. use of the three Cox-2s
compared to traditional NSAIDs had matched that of Permanente
physicians, U.S. consumers and businesses paying for prescription drugs
would have saved over $4 billion dollars, or almost 2 percent of all
U.S. drug spending. Here is a great example where promoting the use of
high-quality generic drugs can be not only significantly less costly,
but safer.
Cholesterol-lowering Statins
A few years ago, the Wall Street Journal reported on Kaiser
Permanente's use of generic lovastatin (Mevacor) as the first line
cholesterol lowering drug for our members. While lovastatin is not the
most potent statin on the market, through appropriate dosing a majority
of patients can readily achieve their target cholesterol levels.
Members who have a clinical need for a more potent statin have easy
access to them. An astonishing fact is that Kaiser Permanente
physicians can treat six patients appropriately with lovastatin for the
same cost as one patient on one of the still-patented alternatives.
This program along with other steps taken by Kaiser Permanente to
address cardiovascular disease has been so successful that in Northern
California, for example, it was recently determined that heart disease
is no longer the leading cause of death among Kaiser Permanente members
(cancer is), even though it remains the leading cause for non-Kaiser
Permanente members in the San Francisco area and throughout the nation.
How Appropriate Generic Prescribing is Achieved
The value of generic drugs is maximized when programs are designed
in a way that does not deny access to necessary but more expensive
brand name prescription drugs. Our goal, instead, is to target the more
expensive drugs to those patients who stand to benefit from whatever
additional value newer drugs might provide, rather than simply
defaulting automatically to the newest drug for all patients. This
result is equally high quality, but far more cost effective use.
These programs work within Kaiser Permanente for several reasons.
First and foremost, our physician clinical experts are intimately
involved in the development and implementation of good drug use
management initiatives. Permanente physicians have the
confidence that their most expert colleagues are in agreement
with the recommendations for drug use initiatives.
Second, the Health Plan's clinical pharmacists are available for
consultation and provide the latest information about
alternative drug therapies. Kaiser Permanente invests
significant resources to make sure that physicians have ready
access to the best objective drug information that exists.
Third, physicians delivering care to patients know that they will not
be penalized for prescribing nonformulary or more expensive
brand name drugs--they know that those drugs are readily
available when necessary. Indeed, they know that some patients
will need the newer drugs and receive them when needed.
Finally, Permanente physicians know that savings resulting from their
efforts will either lower member premiums or enable spending in
other areas, whether subsidizing other, more expensive drugs,
building new facilities or buying necessary medical equipment.
THE BROADER CHALLENGE
If it is Kaiser Permanente's integrated nature, financial structure
and close cooperation among physicians and pharmacists that leads to
our high use of generic drugs, the question remains: what lessons
learned in the group practice environment can be applied in less
integrated settings?
It might not be possible for other types of health plans to achieve
Kaiser Permanente's level of success in generic prescribing, but I
believe that steps are already being taken that can help realize
savings through increased use of generic drugs. Physicians are
clamoring for better, objective information about the comparative
clinical effectiveness of prescription drugs. Thanks to the work of
this Committee, the Medicare Modernization Act included provisions
authorizing the Agency for Healthcare Research and Quality to initiate
a research agenda on the comparative effectiveness of alternative
therapies, including drugs for the same condition. For fiscal year
2005, Congress appropriated $15 million to fund this activity. While
modest, it is an important first step, and we encourage members to
support increased funding in future years. We strongly believe that
increased support for this important research will result in
exponentially greater savings in the future, as physicians see clinical
evidence that guides their practices. I am confident that the research
will show that generic drugs can be used safely and effectively more
frequently than they are now.
We also believe that physician organizations, such as medical
associations and specialty societies, need to take the lead in defining
best practices. Much that is learned from multispecialty group
practices like the Permanente Medical Groups and our colleagues in
academic medicine and medical foundations is not effectively translated
to the larger medical community. We think our colleagues in organized
medicine can play an important role in expanding good drug use
practices.
The new Medicare drug benefit also provides an opportunity to
expand appropriate use of generics. The new drug benefit will provide
important value for Medicare beneficiaries, but other than for low
income persons, many beneficiaries will experience gaps in coverage. In
this context, high-quality, affordable generics are critical to ensure
that beneficiaries have access to the therapies they need. Simply
stated, Medicare beneficiaries can have many more of their
prescriptions covered under the current benefit design if generic
medicines are appropriately prescribed. We are confident that CMS can
and will work with physicians caring for Medicare beneficiaries in ways
that will provide information about the relative value and clinical
appropriateness of generic drugs.
Mr. Chairman, thank you for the invitation to testify here today. I
would be happy to answer any questions you may have.
Mr. Deal. Thank you. Dr. Gottlieb?
STATEMENT OF SCOTT GOTTLIEB
Mr. Gottlieb. Thank you, Mr. Chairman, Congressman Brown,
members of the committee. Thank you for inviting me to testify
before you today. Allow me to briefly introduce myself and then
tell you how my experience relates to what I am going to
discuss today.
I am a practicing physician and a former Senior Advisor to
the Commissioner of the Food and Drug Administration and the
Administrator of the Centers for Medicare and Medicaid
Services. At the FDA and then at CMS, I worked on many policies
that were promulgated during my time at those two agencies that
were aimed at increasing the availability of safe and effective
generic drugs and providing a framework for people to make
wider use of them. But it is as a physician that I have
developed my deepest appreciation for the value that generic
drugs offer.
Practicing in a mostly Medicaid clinic, I often had to
approach my patients' prescriptions requirement, not on what
they needed, but on what they could afford. They could only a
fixed, and usually small, amount of money each month, out of
pocket, on medicines. Generics made it possible for me to
provide my patients with the lifesaving benefits of safe and
effective medicine while staying within their tight budgets.
So the question becomes what steps can we take to encourage
more widespread use of safe and effective, FDA-approved generic
drugs, where these option make sense for patients, both
therapeutically and economically, and without trampling the
incentives for brand-name drug makers to continue to come up
with newer--and yes, better molecules by dismantling legitimate
patent protections.
The good news is that each year patients are making wider
use of generic drugs, recognizing the value that they bring.
Drug insurance companies, which are exposing consumers to more
of the costs of their incrementally more expensive medical
choices are also driving this trend. Through aggressively tiers
formularies of co-pays on more expensive, branded drugs,
consumer who can afford to contribute to the incremental cost
of expensive tastes when it comes to medicines are being asked
to pay a portion of that decision. This is giving consumers
reason to make wider use of low-cost, generic options and even
over-the-counter drugs where these substitutions for branded
drugs make therapeutic sense.
One recent study by Aetna of almost 14,000 beneficiaries
found a 5.5-percent decrease in pharmacy costs and a 7-percent
increase in overall generic utilization when consumers were
exposed to more of the cost of their incremental drug decision.
There is also some evidence from Medstat and elsewhere that
Medicare beneficiaries who have been using their new Medicare
drug cards are more likely than other seniors to use generic
drugs, I think, precisely because the information they have
available through the drug card keeps them informed and
educated on how they can save money with generic drugs.
I believe these trends to expose consumers who can afford
to pay some of the cost of the decisions will accelerate under
the new Medicare prescription drug plan as the plan,
themselves, become more aggressive and adept at managing a drug
benefit and steering patients to lower-cost options where they
exist and where they offer similar therapeutic benefits, but
there are some things that we should all be mindful of.
First, the decision that plans make about which medicines
to have a high co-pay on or prior authorization is often not
linked directly to the cost of the medicine or its value to the
patient relative to a generic alterative, but simply on whether
the plan got a good deal from the drug company. So a far better
way to expose consumers to the incremental cost of a more
expensive drug decision is through health savings accounts or
through coinsurance. Of course, patients have to want to
participate in their own healthcare decisionmaking or be able
to, and no everyone will, so we need to maintain a safety net
for those who cannot.
Second, if we are going to truly take advantage of some of
the opportunities to offer more patient-specific therapies in
the future, using tools like genomics and proteomics, then it
simply follows that patients will need to be more active
participants in weighing the competing medical options that
they will have that will all have benefits and tradeoffs,
including economic tradeoffs.
So what can this committee do to help us prepare for this
future of consumer-led healthcare? I think one of the big
impediments to more active participation by consumers is a lack
of information at the point of care about the economic impact
of peoples' decisions. Far too often when I prescribe medicine
to a patient, I get a phone call a few hours later. They are at
the pharmacy and found out there is a $50 co-pay on the
medicine I prescribed, and can I find something else that
doesn't have a co-pay. Having information about things such co-
pays accessible right in my office and having them available
outside of my office for my patients would give my patients and
I the information tools we need to factor economics into our
choices. I am confident that, armed with this information, we
would opt for lower-cost generics where they made therapeutic
sense more often than we do today.
That leads me to my last point. How can we make this
information more widely available? Here, I encourage you to
look at some recent steps that Aetna has taken. They have
developed a sophisticated website that allows patients to mix
and match similar drugs to see how they can lower their overall
drug bill by changing their drug mix. This is also one area
where I believe that CMS is taking the lead in setting a good
example for the private market through efforts like their drug-
compare website and pushing for incentives and standards to
promote more widespread adoption of e-prescribing. I believe
the government can play an appropriate role, following the lead
set by CMS, to help patients have more information available to
them so that they can weigh for themselves the value that
generic drugs offer at the time that they need to make a
decision about which drugs they want to use.
Finally, I would like to close on two cautionary thoughts
for the committee to consider. First, especially in an age when
decisions to take drugs that are in development today are going
involve more personal preferences and involve criteria that
allow doctors to more closely match medicines to patients, I do
not believe policies that force patients into generic drugs
will success in maximizing overall public health benefit.
Strategies like Fail-First, especially when inappropriately
applied to areas to medicine where compliance is such a big
factor to success, like mental health, has already been shown
to cost more in the end. If plans are going to steer patients
to generic drugs through restrictions on access to branded
alternatives, they need to provide easy ways to opt around
these restrictions for patients for whom the branded drugs
makes the most sense.
Second, and last, I believe we all need to recognize that
no two molecules are the same. While two very similar drugs in
the same drug class might provide largely equal benefits for
the majority of patients, there are always patients for whom
one seemingly similar drug will have very different effects
than its close cousin. As doctors, we see this anecdotally
every day, and literature supports our experience. In fact, we
cannot have it both ways--recognizing, for example, that Vioxx
might have certain risks that another similar drug does not,
yet not recognizing that seemingly similar molecules also have
different benefits.
In closing, we need to arm consumers who want to be more
active participants in their health choices, and who have the
economic means and wherewithal to do so, with information that
could help them weigh economics as one more factor in their
treatment decisions. With the right information available at
the right time, I am confident more of my patients would make
wider use of safe and effective generics when these therapeutic
options make equal sense. Thank you.
[The prepared statement of Scott Gottlieb follows:]
Prepared Statement of Scott Gottlieb, Resident Fellow, American
Enterprise Institute
Mr. Chairman, members of the Committee: Thank you for inviting me
to testify before you today.
Allow me to briefly introduce myself, and then tell you how my
experience relates to what I am going to discuss today. I am a
practicing physician and a former senior advisor to the Commissioner of
the Food and Drug Administration and the Administrator of the Centers
for Medicare and Medicaid Services.
At FDA and then at CMS, I worked on many policies that were
promulgated during my time at those two agencies that were aimed at
increasing the availability of safe and effective generic drugs, and
providing a framework for people to make wider use of them.
But it is as a physician that I have developed my deepest
appreciation for the value that generic drugs offer.
Practicing in a mostly Medicaid clinic, I often had to approach my
patients' prescription requirements not on what they needed, but what
they could afford. They could only spend a fixed and usually small
amount of money each month--out of pocket--on medicines.
Generic drugs make it possible for me to provide my patients with
the lifesaving benefits of safe and effective medicines, while staying
within their tight budgets.
This is not a unique recognition, but one made also by policymaker
across Washington, and especially on this committee. So the question
becomes: what steps can we take to encourage more widespread use of
safe and effective, FDA approved generic drugs where these options make
sense for patients both a therapeutically and economically, without
trampling the incentives for brand drug makers to continue to come up
with newer and yes better molecules by dismantling legitimate patent
protections.
The good news is that each year, patients are making wider use of
generic drugs, recognizing the value that they bring. Drug insurance
companies, which are exposing consumers to more of the cost of their
incrementally more expensive medical choices, are also driving this
trend. Through aggressively tiered formularies or co-pays on more
expensive branded drugs, consumers who can afford to contribute to the
incremental cost of expensive taste when it come to medicines, are
being asked to pay a portion of that that decision.
This is giving consumers reason to make wider use of low cost
generic options, and even over the counter drugs, where these
substitutions for branded drugs make therapeutic sense.
One recent study by Aetna of almost 14,000 beneficiaries found a
5.5 percent decrease in pharmacy costs and a 7 percent increase in
overall generic utilization when consumers were exposed to more of the
cost of their incremental drug decision.
There is also some evidence from MEDSTAT and elsewhere that
Medicare beneficiaries who have been using the new Medicare drug cards
are more likely than other seniors to use generic drugs, I think
precisely because the information they have available through the drug
card keeps them informed and educated on how much they can save with
generic drugs.
I believe these trends to expose consumers who can afford to pay to
some of the cost of their decisions will accelerate under the new
Medicare Prescription Drug Plan, as the plans themselves become more
aggressive, and adept at managing a drug benefit and steering patients
to lower cost options where they exist and where they offer similar
therapeutic benefits.
But there are some things that we should all be mindful of.
First, the decision that plans make about which medicines to have
high co-pay on, or to have prior authorization on, is often not linked
directly to the cost of the medicine, or its value to the patient
relative to the generic alternative, but simply on whether the plan got
a good deal from the drug company.
So a far better way to expose consumers to the incremental cost of
more expensive drug decisions is through Health Savings Accounts, or
through co-insurance.
Of course, patients have to want to participate in their own health
care decision-making, or be able to, and not everyone will. So we need
to maintain a safety net for those who cannot.
Second, if we are going to truly take advantage of some of the
opportunities to offer more patient-specific therapies in the future,
using tools like genomics and proteomics, then it simply follows that
the patient will need to be a more active participant in weighing
competing medical options that will all have certain benefits and
tradeoffs, including economic tradeoffs.
So what can this Committee do to help us prepare for this future of
consumer led healthcare? I think one of the big impediments to more
active participation by consumers is the lack of information--at the
point of care--about the economic impact of peoples' decisions. Far too
often, I prescribe a medicine to a patient only to get a phone call a
few hours later. They are at the pharmacy and found out there is a $50
co-pay on the medicine I prescribed. Can I find something else for them
that does not have a co-pay.
It is simply impossible for me to keep track of all of the
different formularies from all of the different plans that all of my
different patients are on. Having this information accessible right in
my office, and having it available outside of my office for my
patients, would give my patients and I the information tools we need to
factor economics into our choices.
I am confident, that armed with that information, we would opt for
lower cost generics--where they make therapeutic sense--more often than
we do today.
That leads me to my last point: How can we make this information
more widely available? Here I encourage you to look at some recent
steps that Aetna has taken. They have developed a sophisticated web
site that allows patients to mix and match similar drugs to see how
they can lower their overall drug bill by changing their drug mix.
This is one area where I also believe that CMS is taking the lead
and setting a good example for the private market, through efforts like
their drug compare web site and pushing for incentives and standards to
promote more widespread adoption of e-prescribing.
I believe government can play an appropriate role, following the
lead set by CMS, to help patients have more information available to
them so that they can weight for themselves the value generic drugs
offer at the time that they need to make decisions about which drug
they want to use.
Finally, I'd like to close on two cautionary thoughts for the
Committee to consider:
First, especially in an age when decisions to take the drugs that
are in development today are going to involve more personal preferences
and involve criteria that allow doctors to more closely match medicines
to patients, I do not believe policies that force patients into generic
drugs will succeed in maximizing overall public health benefit.
Strategies like ``Fail First''--especially when inappropriately
applied to areas of medicine where compliance is such a big factor to
success, like mental health--has already been shown to cost more in the
end. If plans are going to steer patients to generic drugs through
restrictions on access to branded alternatives, they need to provide
easy ways to opt around these restrictions for patients for whom the
branded drug makes the most sense.
Second and lastly, I believe we all need to recognize that no two
molecules are the same. While two very similar drugs, in the same drug
``class'' might provide largely equal benefits for the majority of
patients, there are always patients for whom one seemingly similar drug
will have very different affects than its close cousin.
As doctors we see this anecdotally every day and the literature
supports our experience. In fact, we cannot have it both ways--
recognizing for example that Vioxx might have certain risks that
another similar drug does not, yet not recognizing that seemingly
similar molecules also have different benefits.
To end on my point about the direction of the technology and of
drug development, we are heading toward more targeted treatments,
better information about those treatments, and drugs more finely
matched to individual patient needs.
We simply cannot adopt policies that force square pegs into round
holes, forcing patients on to medicines when better options exist,
simply because of cost. We cannot take that decision away from the
doctor and the patient. Doing so bucks the tide of innovation and best
practice.
What we can, and I think should do, is arm consumers who want to be
more active participants in their health choices, and who have the
economic means and wherewithal to do so, with information that can help
them weigh economics as one more factor in their treatment decisions.
Too often in my own medical practice I have been left in my office,
scratching my head along with my patient, wondering what the drug bill
will be when my patient arrives at their pharmacy.
With all of the valuable information tools we have at our
fingertips, there is no reason we need to be left asking these
questions. Armed with the right information at the right time, I am
confident more of my patients will make wider use of safe and effective
generic drugs when these therapeutic options make equal sense.
Mr. Deal. I thank the gentleman. I recognize myself for
questions. Ms. Jaeger, one of the things that I understand that
is at least a partial impediment to getting some generics on
the market is the backlog at FDA for approval of applications.
Is that correct?
Ms. Jaeger. That is correct, Chairman.
Mr. Deal. Could you give us some of what that problem--the
magnitude of it?
Ms. Jaeger. Certainly. Over the years, the OGD has limited
resources, and if you look at the last 2 or 3 years, OGD, the
Office of Generic Drugs within the FDA, has been flat-funded;
yet every year they receive more and more applications for
generic drugs, and they are not getting any resources. So as of
December of 2002, there were over 7,000 applications pending
before the agency for their review. And it turns out, of
course, that they probably won't even picked up and looked at
until probably sometimes late this Fall, if at all.
And so we are looking at a situation where applications are
languishing there before FDA, and it is just a matter of time
before they get picked up and reviewed. The review time for
generics is much longer than, actually, and NDA product, a
brand product, taking, on average, somewhere around 17 months.
And we would hope that through some more accountability, some
more oversights within the FDA, starting with the
Commissioner's Office and going down to the Senator level, that
perhaps we could move some of the applications through in a
more timely fashion.
So it is an issue of yes, OGD needs more appropriations and
needs more resources to deal with the backlog, but we also need
to ensure that we provide the generic drug with the appropriate
oversight and accountability because some applications are
going on consults--legal consults going; scientific consults--
and these consults, also, are taking a substantial amount of
time--sometimes 7 months, sometimes 9 months, and sometimes
years in the legal office of FDA.
Mr. Deal. One of the things that has been suggested is that
generics should be put in the same category as we place medical
devices, applications for new drug products, even animal
medicines, and that is in order to speed up the review time.
They have agreed, and we put in place, a user fee for them.
Would your association be willing to pay a user fee in order to
have additional resources that would speed up the time for
approval?
Ms. Jaeger. That is a good question, Mr. Chairman.
In the past, it didn't make much sense because there were
so many loopholes in the Hatch-Waxman Law that even if our
industry did actually pay a user fee, the applications were
going to languish there because of all of the loopholes that
the brand industry could utilize to delay the generic
applications. So in the past it made no sense.
As we go forward, I think our industry could certainly
consider that thought again; but again, it also creates a
barrier for some of the smaller drug companies to bring their
products to the market. The more competitors we have in the
marketplace, the more it benefits consumers and brings down
costs.
Mr. Deal. Well, you know some of--I know in the medical
device area, those fees are calculated based on the size of the
company that is asking for help, and they have reduced fees if
they are smaller companies.
So is that something we could look at, perhaps, down the
road?
Ms. Jaeger. Certainly, we can have our industry look at
that and get back to you, Mr. Chairman.
Mr. Deal. Would you do that, please?
Ms. Jaeger. Yes.
Mr. Deal. Ms. Cramer, I think we have all agreed here that
part of the solution to this is better patient information, and
you have pointed out what AARP is doing by way of trying to
educate the public about consumers. Have you indicated or have
you had any indication that this is taking hold? That it is
having an effect?
Ms. Cramer. Mr. Chairman, as you have indicated, AARP has a
number of avenues for consumer education. I mentioned our Wise
Use Program, where we try to promote the use of generic drugs.
We also have an online drug safety and effective tool that
is available to members as well as nonmembers alike, and next
month we will be launching a new tool on the web that will also
be available to members and nonmembers, alike, called Medicines
and You, which will do a number of things to educate
individuals on drug interactions and number of other things. We
have not, to date, evaluated the effectiveness of the Wise Use
Program.
Mr. Deal. Okay. My time is getting away from me, too, and I
want to hit something really quickly.
Ms. Jaeger, you indicated that one way to speed this up was
to have in place State statues that would require the ``no
substitution'' to be handwritten on the pad where you prescribe
it. Dr. Gottlieb has indicated that in one other area you
talked about, about the carve-outs not being appropriate, that
we have to be careful that we don't go to the Fail First
approach on some of those areas.
As we are hopefully going to be looking at Medicaid
reforms, are those kinds of things, like requiring doctors to
go the little extra mile to make sure they get a brand name
versus a generic--are those the kind of things that you are
suggesting we incorporate in Medicare reform? Many of the
States already have those in place, my State being one of them.
What are you seeing in terms of--not necessarily you, but
anybody else that wants to comment, what are you seeing in
terms of movement in that direction to put the emphasis on the
front end, rather than relying on consumer education?
Ms. Jaeger. Certainly, I would be happy to answer that. I
think a lot of States are doing some positive initiatives in
their State Medicaid program; however, at least the vast
majority of the States--are not utilizing all of the tools that
are out there to maximize generic substitution. Our concept is
that if you take a mandatory substitution program, and you look
and you see, well, there are some holes in that, well, then you
plug the holes, such as adopting a rigorous DAW program,
dispensed-as-written program, like Massachusetts did and Hawaii
did.
At the same time, States also need to look at aggressive
MACing, how they reimburse under that program. And a lot of
States, while they may adopt MACing, they don't really have
aggressive MACing.
Some States aren't looking at the products in the
marketplace, the three generics in the marketplace, and taking
that average and using that average to reimburse, where other
States are perhaps still using the brand plus two generics, so
it think, really, it is a combination of all of those tool that
would actually substantially increase generic utilization and
saving.
Mr. Deal. Thank you. My time has run out. Mr. Brown?
Mr. Brown. Thank you, Mr. Chairman. Ms. Jaeger, you have
raise several concerns about a number of provisions contained
in recently negotiate free trade agreements, and I appreciate
your comments about that. As you likely know, Congress is
likely to vote, and Majority Leader DeLay said with would be
voting on CAFTA, the Central American Free Trade Agreement,
before the end of May. It is my understanding that CAFTA
enables brand-name drug companies to deny Central American
consumers the same benefits of generic competition for even
longer period than U.S. Law, and I want to explore that and
have you explain that.
Under U.S. law, patent extension for brand-name
manufacturers are limited--because of some reforms recently,
are limited to the active ingredient of the new drug and to the
extension of a single patent. My understanding is that CAFTA
allows multiple extensions for any and all patents covering a
drug without any time limits at all. If that is the case,
CAFTA, then, would give drug makers significant, more powerful
patent-extension tools to delay competition from generic
medications, more in these Central American countries and the
Dominican Republic, than they have in the U.S. Is that correct?
Ms. Jaeger. Yes. Let me actually take your first issue
first, having to do with the 5-year date of registration
period. In the CAFTA agreement, there is a 5-year registration
period for a brand company to file an application in a CAFTA
country. They need to file that application within 5 years of
receiving FDA approval. So as you can imagine, most likely, the
brands aren't going into a CAFTA country until the eve of their
exclusivity here in the United States has expired or is about
to expire. And that actually would delay, of course, the entry
of that lifesaving medicine to the CAFTA country, but it also
will delay a generic going into a CAFTA country for at least 13
years because you have to add up the 5-year date of
registration period plus 1 to 2 or 3 years, depending on the
country, for their review of that application. And of course,
once that product is approved, then, they would get an
additional 5 years in that CAFTA country. So we are concerned
about that particular provision from, not only, international
harmonization concept, but also about exporting out products
into the CAFTA countries.
The second issue, on patent extension: in CAFTA, there is a
provision on patent extensions, and the language is very, very
murky. We would like it to be interpreted that it be consistent
with the U.S. law, which is that only a new chemical entity can
get a patent extension. Unfortunately, the way it is written,
it is murky to us, and it looks like that any product could
receive a patent extension for a regulatory review period. So
as you can imagine, if you had a product that had a modest
labeling change or went to a once-a-week-dosage form, those
products, too, could obtain additional market protection, and
we think some interpretations could roll that back and get it
to be consistent with the U.S. law. And we, really, again, are
very concerned about international harmonization measures with
respect to the free trade agreements, not only CAFTA, but
others as well.
Mr. Brown. Okay. So if that is the case, as you claim, the
name-brand drug makers will have more powerful patent extension
tools in the five Central American countries and the Dominican
Republic--will have more powerful tools to do this than they
have in the United States. Take this out to the next step, if
you would. The name-brand drug industry clearly has used its
political muscle, not just in this Congress, but around the
world. And during the CAFTA negotiations, one country,
Guatemala, actually had passed a generic drug law that the U.S.
trade rep, representing the United States government--and as
you know, the U.S. trade rep has an arm--I don't recall the
exact name and office of prescriptions drugs, whatever--that
they pretty much said to the Guatemalan government that if you
want to be included in the Central American Free Trade
Agreement, that generic drug law needs to be repealed, which it
was. Understanding that political muscle or that lobbying
muscle that the drug industry had, are you concerned that the
drug industry will use CAFTA as leverage to force the U.S. to
conform to the Central American laws and be able to use
political muscle in that direction to, in a sense, lobby
Central America for stronger patent protection laws, therefore
less access to generics, and then turn around and use those
laws to weaken generic competition opportunities in the U.S.
Ms. Jaeger. We are concerned that if the free trade
agreements, as they are being negotiated right now and as they
are interpreted--to the ones that actually have been passed--if
they are not pulled back to be consistent with the U.S. law,
there could be some damage to the U.S. healthcare system in
years to come.
To give you an example: in most free trade agreements, the
best-mode requirement having to do with patentability has been
omitted. Now, that is an issue here for the United States. That
is very critical with respect to patentability and having a
company downstream trying to make a product. As you can
imagine, there must be 45 or 50 different ways to make a
biopharmaceutical. In the United States, we require the brand
company to put forth the best mode of making the product in
their patent. And unfortunately, that particular requirement is
being deleted. And now, we are also seeing here--there is a
House patent-reform bill that is actually throwing that concept
up--that thorough international harmonization, perhaps the U.S.
should delete best-mode.
Now, we are hopeful that Congress in their wisdom will see
pharma's backdoor maneuvers for what they are and reject that
and again maintain the U.S. patent law, as is. And also,
hopefully, with respect to market exclusivity around the world,
you know, pharma has been very good and very diligent about
going and getting other countries to increase their market
exclusivity up to 10 years in some situations, six in others.
They have got reform packages in Canada and in other country,
so the generic industry is concerned about international
harmonization measures. There are two provisions in two bills
in the Senate that are asking for international harmonization
with respect to market exclusivity.
So we are concerned, again, that these issues are out
there, but to date, at least the Congress in their wisdom,
again, has flatly rejected these concepts, and hopefully, we,
as a Congress, can urge USTR to cleanup the free trade
agreement base document and provide a fair interpretation.
Mr. Bilirakis [presiding]. The gentleman's time has
expired. Chairman Barton to inquire.
Chairman Barton. Well, thank you, Mr. Chairman. I am just
going to ask one question because I am supposed to be on the
floor right now on our amendment to the Homeland Security Bill.
Mr. Brown and I are pretty close on agreement on most things.
We always come to it on a different point of view. I am a
supporter of the CAFTA agreement. I would list him as
undecided. I don't think we have convinced him yet. But we
share a similar concern about generic drugs in the marketplace
being hamstrung by slightly modifying a patent or modifying
something so that you have to go through the review process
again. I am with him on that.
Is that something that this committee should look at this
year? Do we need to, perhaps, modify Hatch-Waxman to make sure
that the drug manufactures don't game the system to re-extend
their patents and not let the generic version come into the
marketplace as soon as it could? Is that something we need to
look at?
Ms. Jaeger. Well, let me just be clear for the record. GPhA
actually supports CAFTA. What we are looking for is
interpretation with respect to CAFTA, and we would also like
USTR to change their base document going forward. I mean that
is what we think is really the problem with the issue, is that
the USTR has this base document, and every free trade agreement
they kind of go up to the next notch, and they are continuing
to increase this base document. We even think it needs to be
brought back to current U.S. law, and we think it needs to be
clarified so that no gaming can occur, because right now, the
way it is drafted, gaming could potential occur in other
countries, and you could have a situation where products cannot
get into a CAFTA country or an Andean country going forward.
Chairman Barton. Mine is not a CAFTA question. I am glad
that you and I agree that we support CAFTA. Okay. What I am
asking is, in the United States market, whether there was a
CAFTA agreement on the table or not--generics that are approved
do save money. Should we modify--and I am not advocating; I am
asking an honest question. Should we modify, do anything, so
that patents that are about to expire that have a generic
equivalent that could come into the marketplace don't get
slowed down because the patent holder modifies something or
maybe perhaps filed, I have heard, in some cases as many as 50
patents when they got the original patent, and then they come
in and say, we have changed it, and therefore it is this now,
and you really can't do a generic. That is my question.
Ms. Jaeger. And to answer you question is that, through
MMA, we did have some hatchback reforms that actually did close
some of the unintended loopholes, and so we have made some
progress on that front, and we are starting to start to see
some of the results. However, having said that, we are seeing
that brand pharma has found new games in the system and that we
are just starting to see these new games being played out.
So yes, I would agree with you that we need to consider and
identify the new loopholes and actually take the appropriate
corrective action.
Chairman Barton. Great. Thank you. Thank you, Mr. Chairman.
Mr. Bilirakis. The Chair thanks the gentleman. Mr. Waxman
to inquire.
Mr. Waxman. Thank you very much, Mr. Chairman. I want to
ask Ms. Jaeger.
We all recognize that we need to encourage doctors to
prescribe generic drugs; however, there has been a longstanding
disinformation campaign, presumably by brand-name companies,
leading doctors to believe that generic drugs can be only 80
percent as effective as the brand-name version. My
understanding is that this statement is a serious
misrepresentation of FDA's statistical tests for determining
the equivalence of generic versions. According to FDA's
official listing of all approved generic drugs, the agency has
twice conducted surveys to quantify the average difference
between the innovator and the generic products, and in both
cases, in both studies the agency found that the average
difference was 3.5 percent or less. The agency has also stated
that the existing bioequivalent standards are, in fact, so
tight that, if FDA were to require more stringent tests, it
would even be possible that if the innovator form reformulated
its own product, they would not be able to demonstrate
bioequivalence to itself. Is FDA correct in this regard?
Ms. Jaeger. Yes, we believe that FDA is correct. There has
been numerous misinformation campaigns out there by various
brand companies, one having to do--I think that most people
would probably know, having to do with the narrow therapeutic
index products. DuPont Mark, back in the late 80's, going into
the early 90's, went around the country trying to convince
policymakers at the State level that generic drugs that fell
into the category of NTI products were not as safe and were not
as effective as their brand-name counterparts; and therefore,
they had to have carve-out rules with respect to these NTIs.
The FDA did come into the issue and actually did testify in a
number of States on behalf of the generic industry, and did
write a number of letters to medical professionals and
policymakers at the State level. But unfortunately, more needs
to be done because now we see a new wave of this misinformation
campaign, having to do with mental health drug, epilepsy,
cancer--all sorts of drug products. And so a strong campaign
from the Food and Drug Administration about the safety and
sameness of generics, I think, would be very, very helpful.
Mr. Waxman. And this story that is circulating about only
80 percent as effective, you don't buy that? FDA doesn't buy
it?
Ms. Jaeger. No. What the brand company representatives will
always say is that the generics only have about 80 percent of
the active ingredient, and they will say that is FDA's rule.
Well, the rule is 80 to 125, and that has to do with a
statistical parameter. It has nothing to do with potency of the
product. The potency of the generic has to match, by Federal
law, that of the brand. It has to be 100-percent potent, so
this concept that generics have less than 100--80, 75, whatever
it may be--is really just plain wrong.
Mr. Waxman. I just want to ask you two more questions, and
I guess very quickly because the time is expiring. You
described the threat to generic access in this Bioshield II
legislation. It would provide excessive incentives to drug
companies with no relationship to the value of the benefits we
might expect. I am concerned about this wildcard exclusivity
provision and want to understand it in more detail, how it
would work. As I understand it, a manufacturer could gain an
outrageous windfall in exchange for only a minor addition to
our arsenal of countermeasures. Say, for example, Pfizer wants
to develop a treatment for a minor side effect of an anthrax
vaccine. Is it true that Pfizer could, then, turn around and
get 2 additional years of exclusivity on its best-selling drug
Lipitor? And how much would that cost the American people?
Ms. Jaeger. Well, if Pfizer just even did a minor study on
animals having to do with one of the antibiotics in their
portfolio, never mind an anthrax vaccine, but just a small
antibiotic, a small study, they would be able to reap a 2-year
wildcard extension. And that wildcard extension can be put onto
any product of their choice. The product does not have to do
with anything with respect to bioterrorism. So if Pfizer was to
put that wildcard on the product Lipitor, that would be a
windfall to Pfizer of $14 billion and lost savings to the
healthcare system of about $10 billion. And when we have looked
at it, we took the top 20 most profitable drugs in the United
States. We extended each product for about one wildcard, just
one, and it turned to be about $100 billion in windfall to
brand pharma.
Mr. Waxman. And quickly, the few seconds I have left, if we
had a pathway for biological products, can you give examples of
some of these products that are off-patent or will come off
patent soon and what kind of savings we could anticipate from
generic biological products if Congress creates an approval
system for them?
Ms. Jaeger. Absolutely. There are a number of products,
right now, that companies have applications in that are pending
before the agency having to do with insulin and human growth
hormone. Others have to do with companies looking at Epo. All
of these products would provide substantial savings to the
American consumers if we had generics.
Now, to give you sort of an example, right now, the
biologic market is about $30 billion in pharmaceutical costs.
By 2010, it is supposed to be up to $60 billion. So if we just
take a modest competition concept and say that generics come in
about 20 percent of that of the brand product, that is savings
of substantial billions of dollars. And so even if it is a 10-
percent differential--which we think it is going to be much,
much more than that--again, it is going to provide substantial
savings to the healthcare system, especially Medicaid and
Medicare.
Mr. Waxman. Thank you very much. Thank you.
Mr. Bilirakis. Thank you, Mr. Waxman. The Chair recognizes
himself.
I was glad to see Ms. Capps come back in because she told
us about the situation where a generic resulted in an allergy,
so sort of continuing on with Mr. Waxman's point on the
equivalency, if you will, and efficacy and whatnot--and maybe
this is better-asked of Dr. Gottlieb.
The situation Ms. Capps referred to, where there is an
allergic reaction to the generic drug, and therefore that
patient had to go back to the brand-name drug, if we have an
equivalency here of ingredients, et cetera, et cetera, why
would that be, Doctor?
Mr. Gottlieb. I was struck by the comments as well, and I
am mostly struck by the comments of my patients in my office
every time they come in and tell me that they had a different
reaction to the generic drug than the branded drug, and they
request the branded drug only. Sometimes, there are different
ingredients used in the generic drugs to help formulate the
pill, and sometimes that could get to how the pill is
ultimately dissolved in the stomach and perhaps absorbed. But
by and large, the experience that the patient receives from a
generic drug and a branded drug should be absolutely the same.
They should be bioequivalent in the patient's blood and have
the same therapeutic effects. So I think these anecdotal
experience is notwithstanding, and it probably is for certainly
isolated patients situations where the different things used to
formulate the pill might have a specific effect on a patient. I
think, by and large, it is more of a perception problem with
patients, and in that respect, you know, quite frankly, the
branded drug makers have a perception of quality, and sometimes
the generic drug makers don't. I have patients who come in and
say I don't want a drug from India; I don't want a drug from
China. And so there is a perception in peoples' minds of a
difference in the quality. I think that plays into how they
experience their drugs.
I am glad to see that GPhA has done some of its own
advertising efforts to try to support the quality of generic
drugs. FDA has done a lot, and the government's played a role
there. I think the generic drug industry is highly profitable
and can probably, hopefully, do more in the future to help
substantiate in peoples' mind that they are getting a similar
quality medicine that should have the same effect as the brand
alternative.
Mr. Bilirakis. Well, you know, Dr. Tom Colburn, who is now
in the Senate, was on this committee a few years ago, and I
know that he mentioned to me a number of times that there were
exceptions, that there wasn't the same efficacy and whatnot;
and therefore, doctors had to be careful in terms of
prescribing--it was to that effect. I am not trying to put
words in his mouth, but that is basically the way I interpreted
his comments.
And I asked Dr. Burgess, after I made my opening statement,
and he sort of, in a sense, said the same thing--you know, very
rare situations. So I mean that does happen. I mean it is not
just a perception--I shall use the word perception. It is not
just a perception?
Mr. Gottlieb. I think it is largely a perception issue. I
think there is isolated cases in medicine where there have been
drugs that have been formulated the follow-up version have been
formulated differently and had certain different reactions for
some patients. I am thinking of a couple in my mind, but that
is the real minority of experience with patients. And I think
in the majority of cases where you hear patients coming in and
complaining of a different response to the drug, it usually ahs
to do with a different taste that the drug had or a different
composition that it had in their mouth as they swallowed it or
it dissolved because of the way its formulated and not really
related to the active ingredients in the drug.
Mr. Bilirakis. I did want to ask you about the information
available to physicians, a point that you made in your
statement, but first--and I shall probably run out of time, and
if I do, possibly you can furnish that to us in writing. I
think that would be a very interesting point there.
But let me ask Ms. Jaeger, how many drugs are there out
there? Your testimony referred to 195 most used drugs----
Ms. Jaeger. Right.
Mr. Bilirakis. [continuing] that sort of thing?
Ms. Jaeger. I would have to defer to FDA, but I think there
are like over 700----
Mr. Bilirakis. Over 700?
Ms. Jaeger. [continuing] various drug products, some being
very, very old, and their newest are probably in the part of
the list.
Mr. Bilirakis. Now, of the 53 percent of all prescriptions
dispensed that generics represent, what percentage is just for
drugs that have a generic alternative? Do you know the answer
to that?
Ms. Jaeger. Are you talking about the generic efficacy
rate, sir?
Mr. Bilirakis. Yeah, I am talking about the--I guess the
question is what percentage of brand-name approved drugs have a
generic alternative.
Ms. Jaeger. I don't have exactly that number. The ones, of
course, that are solid dosage forms than others and those that
have gone off patent, most all likely have a generic equivalent
to them.
Mr. Bilirakis. They all have----
Ms. Jaeger. However, there are areas which we do not have
generic alternative, such as like topical corticosteroid
situations, other inhalation products, such as Flonase, a major
blockbuster. And that is because there is no bioequivalence
technology to date that can actually support the approval of
those products. Research is ongoing in those areas, but more
research needs to be done before a generic can come into the
marketplace.
Mr. Bilirakis. So in the areas where it can be done, you
say that generics exist or at least are in the process of being
approved or disapproved or whatever. Is that correct? Very,
very quickly because I----
Ms. Jaeger. Sure. I think that there are a number of
research projects that FDA could take and NIH could take to
actually move along so that we could ensure that all of those
brand products that should have generic competition do.
Mr. Bilirakis. I thank you. Let us see. Ms. Bono to
inquire. We have going to wait awhile. I guess I got to go to
the other side. Ms. Capps.
Ms. Capps. Thank you, Mr. Bilirakis. It is nice to see you
back in this chair.
And Ms. Jaeger, I am tempted to follow-up because it was
very interesting, the conversation about protecting from over-
use of generics, if in fact--and we could have that argument--
or not argument--conversation, because I think we basically
agree. We just want to make sure that we are doing the right
thing. But I just want to not let us forget the major piece of
information that you brought to us, the fact for every 1-
percent increase of generic utilization, there would be nearly
$4 billion--I think I heard you say that.
Ms. Jaeger. Four billion.
Ms. Capps. In additional savings in through the various
policies that you discussed in your opening testimony. Now, I
serve on the Budget Committee, and I understand the task that
is going to be given to this committee, which is going to be
challenging for me, onerous, and we need all of the help we can
get. If you could, spell out a little more in detail what this
would mean for Medicaid.
Ms. Jaeger. With respect to Medicaid, I think the question
really deserves to go to CMS, and they could probably best
answer that question. But however, from the information we have
provided today, I think you can sort of extrapolate, being that
Medicaid is roughly about 17 to 18 percent of the total
pharmaceutical prescriptions in the United States, and so,
roughly, the savings are going be in the average of about $500
to $600 million per year.
Ms. Capps. For Medicaid?
Ms. Jaeger. For Medicaid.
Ms. Capps. I see. So this would mean that the incentive
would be that the more Medicaid recipients are using generic
prescriptions, then the greater the savings will be to the
overall policy, meaning that more Medicaid recipients would be
able to--and so forth that follows.
And you spoke about some best practices, which I am also
impressed with, but also, again, want to make sure there are
safeguards there and hope that we could work with you to, not
enforce these, but to make them available. Sometimes, as you
have said, there are small, minute techniques on the
prescription pad or in patient information and education that
we could help disseminate so that this could be possible, and I
encourage you to continue to do that and hope that we can work
with you.
I am going to turn now to the other major health topic,
Medicare population. Ms. Cramer, I would be interested in
finding out what kind of patient protections you feel should be
build in to guard against patient harm in the population you
are representing, the seniors and those with disabilities, but
particularly seniors with the AARP, and how formularies can be
used in the most appropriate ways.
Particularly--if I could spell this out a little bit more,
I am particularly concerned about the impact that formularies
may have on the Medicare population, Medicare folks who are the
disproportionately high users of prescriptions, and the dangers
that some plans have so that they can increase their profits,
and they do so at the expense of access to drugs under their
plan.
In fact, my friend who we were talking about earlier with
Mr. Bilirakis, asked if she could use the brand-name, and her
Medicaid-Plus Choice provider, the HMO, denied her. So we want
to make comment on steps that Medicare should take to ensure
that beneficiaries are not harmed by restrictive formularies.
Ms. Cramer. Congresswoman, with respect to your question
about patient safeguards that should be available, AARP reports
that when formularies offer preferred drug brands to their
patients for generic drugs that there should be a very well-
defined--overly priced--AARP believes that the final decision
about--however, that physicians--there need to be a clear--AARP
believes that patients should be protected by--the appropriate
medications--the brand name instead of the generic. The AARP
also believe that patients should have quick access to the
brand-name drugs; there should be no delays.
Ms. Capps. It is easier said than done, and sometimes it
feels to consumers that the person practicing medicine is the
person in green eyeshade, and if you are ever in contact,
sometimes, with your insurer or the HMO-person, you think is
this person anywhere connected to--and we don't want to
undermine the skill and also the responsibility that the
provider, most often the physician, has with respect to the
patient. And I want to turn to Mr. Carey. Mr. Carey----
Mr. Bilirakis. Well, your time has expired.
Ms. Capps. Oh, I have already gone--oh, all right. If I
could, I would ask you how your formulary, Mr. Carey.
Mr. Bilirakis. Furnish it in writing, as Dr. Gottlieb----
Ms. Capps. Thank you. I would like to note----
Mr. Bilirakis. Ms. Bono to inquire.
Ms. Bono. Thank you, Mr. Chairman. I want to thank all of
the panelists for being here and say that Dr. Gottlieb has done
a good job of answering my questions already, so I am going to
read some prepared questions for Dr. Berger. Can you explain
some of the incentives you give to pharmacies to encourage
greater dispensing of generics?
Ms. Berger. This is generally--sorry. I will tell you I
have very little information and can get back to you further
information on this, because the financial arrangements that
are made with the pharmacies are really done outside of my
purview. They are not done across the board. They are done
individually, through relationships with our clients. So that
is really all I can share with you at this point in time, due
to my lack of knowledge on that specific issue.
Ms. Bono. Can you explain what the process would be for a
physician who wanted to prescribe a brand-name drug to a
Caremark patient when a generic was available?
Ms. Berger. Absolutely. At the end of the day, it is the
physician's decision as to what drug is prescribed, so if there
is a generic available and the physician either chooses or
feels it is necessary for a participant--which is what we call
patients. I am a little schizophrenic at times, because I am a
practicing physician as well--but if the participant needs the
medication, they have every right to write it.
Ms. Bono. Is there going to be a follow-up from Caremark to
that physician to talk about the next time a name brand is
requested? Is there follow up to make sure that that doesn't
happen again?
Ms. Berger. We will communicate with the physician. We
communicate with all physicians around educating them on
generics. But if there is a generic available, and we have not
had a specific conversation on that patient on that drug, we
will have a conversation with them, get their feedback, and
then document that so that there is a period of time that we
will not go back to them on that specific prescription for that
specific patient again.
Ms. Bono. Okay. Thank you. And Dr. Gottlieb, can you
explain what Fail First policies are? I think we understand the
idea, but can you explain why you feel they are a bad idea.
Mr. Gottlieb. Well, Fail First policies, as you know, are
policies where patients are steered toward a certain drug or a
certain class of drugs because of the economic savings, by in
large, because there is a generic alternative. I think in many
areas of medicine, our problem is that we are really under-
medicating a lot of chronic disease, mental health being one of
them, certainly, thing like hypertension, diabetics. And if
there is a reason why a doctor wants to prescribe a certain
drug for a certain patient that might not, on the face of it,
make economic sense, but the doctor feels it is going to make
that patient comply with the medicine or achieve a certain goal
more quickly, that is a very important public health benefit
that I wouldn't want to take away from the physician. You know?
For example, if I have a patient that I don't think is going to
come back and visit me many times, I want to get it right the
first time. I want to give them the most efficacious drug and
the most tolerable drug. Well, in some cases, that might be an
expensive, branded calcium channel blocker, even though
guidelines might say use the generic diuretic first or a beta
blocker or some older medicine. But there is a conscious reason
why I opted for a different drug, even though it might not have
met formulary guidelines or the economic considerations of my
health plan.
The other thing that concerns me as a physician, just as
sort of a follow-up point, is not only the generic
substitutions that can be made that don't take into
considerations these kinds of individual concerns that a doctor
might have for a specific patient, but also the way formularies
lump drugs and lump classes of drugs--for example: saying that
all lipid-lowering statins are the same. Well, doctors know
they are not the same, and there might be a reason why you want
to start with a more expensive statin, because it might be a
higher potency--or lumping together categories of drugs called
ASE inhibitor with ARBs, which some formularies do. For a
certain percentage of patients, they have very real
differences, and you might be making a very important
therapeutic decision, putting a patient on one drug over
another. And so that concerns me as well when you look at
formularies.
Ms. Bono. Thank you very much. Mr. Chairman, I think my
time is about up. I shall yield back.
Mr. Bilirakis. The Chair thanks the gentlelady. Mr. Allen
to inquire.
Mr. Allen. Thank you, Mr. Chairman. I also want to thank
Ms. Baldwin for allowing me to go a little bit out of order.
I want to thank all of the panelists. I did want to say to
Ms. Jaeger, thank you very much for your comments about CAFTA
and about trade-agreements in general. This has been the hidden
story of our trade negotiations. And I believe that what the
USTR tried to do in Australia was really unconscionable--that
is another whole story--and that you need to look at CAFTA and
what we did in Guatemala, successfully getting the Guatemalan
legislature to reverse itself and give five to more years of
exclusivity in that law, there, which will simply prolong the
ability to bring generics to the Guatemalan market.
I did want to turn, however, this whole question of
comparative effectiveness and make a couple of comments and
then ask Dr. Perry a little bit about how it is working for
Kaiser Permanente. One of the problems we have is that there is
so little information that is not pharma-funded about the
effectiveness of the drugs. And we see the ads just flood our
television airways, and that is what some people are using to
make their decisions. And so we now have, in the last Congress,
we got $15 million.
I will turn to that right now, since it is there. I will
divert for a moment to this. One point I wanted to make in the
course of this hearing was to say that when we talk about
generic substitutions, they are of great usefulness. But
remember: of the top 50 bestselling drug--the top 50 drugs by
sales in the United States--three have generic substitutes.
Three. So we have a long way to go to manage the healthcare
costs of our pharmaceuticals, but generics can help. Thank you.
That is very good. Generics can help.
You know, the Department of Defense just earlier this month
announced that it will stop paying for Nexium, which we all
know as the healing purple pill from the TV ads. It was the
most heavily advertised drug in 2004, and the Pentagon, like
others, need to steer people and physicians away from these
very expensive me-too drugs that frankly have no significant
medical advantage but cost much more than available generics.
So Joanne Emerson and I, last year, had a bill for $75
million to go to ARC and the National Institutes of Health for
comparative-effectiveness and cost-effectiveness research.
Before all of my time is gone, I do want to ask Dr. Perry,
because you mentioned the importance of those kinds of
competitive-effectiveness studies, from your experience, can
you give us some guidance? One, is $15 million going to be
enough to do the job? And two, is there any light you could
shed on your own experience with doing comparative-
effectiveness undertakings? I gather you have got regional
committees to review drugs that treat the same condition.
Mr. Perry. In Kaiser Permanente, the pharmacists and the
physicians use as much evidence as is out there to determine
formularies and information for physicians and information for
members and patients, and we heavily use the comparative-
efficacy studies. Where they exist, we really use them, but
they don't exist in enough areas.
I shall give you an example. As I was flying up from
Atlanta, I was reading my medical magazine, my literature, and
there is an ongoing controversy with the very drugs that Dr.
Gottlieb was saying. The more expensive drugs in the United
States studies reduce heart attacks. Now, there is a British
study that says it increases heart attacks. We need to know
that information because it is very important for us, but also,
we need to know that, or just think of the impact on Medicare
Part D and the impact of both the cost of drugs and what is the
long-term outcome.
So we have these controversies, these areas where we don't
know, in major areas like cardiovascular disease and diabetes,
and we need to know that because it has such a profound impact.
And we do, very rightfully, spend, I think it is over $35
billion in NIH and some of it on primary research, and it is
going to have, hopefully, more therapies evolve, but until we
know which one is the right one, there are going to be
tremendous impacts, so I think that $15 is very small, given
the magnitude of the impact on us, and on Medicare, and on the
patients and members we serve.
Mr. Allen. Thank you. I would just--in conclusion, Mr.
Chairman, would just say, you know, this can be a completely
bipartisan effort going forward, and I look forward to working
with you.
Mr. Bilirakis. It would seem that way, wouldn't it, because
of all of the opening statements here, and we all seem to be in
agreement in general.
I would ask: you made the comment that of the top 50
sellers, only three have generics?
Mr. Allen. That is right.
Mr. Bilirakis. But I asked Ms. Jaeger, basically, regarding
the top sellers, and you indicated that virtually all of them
have generics or at least they are in the pipeline or something
of that nature. Did I----
Ms. Jaeger. They have applications pending before the
administration.
Mr. Bilirakis. All right. That is my point.
Ms. Jaeger. The application will be pending, yes.
Mr. Bilirakis. Yes.
Ms. Jaeger. And so at some point in time, when the patents
expire and the market exclusivity expire for those particular
products----
Mr. Bilirakis. Okay.
Ms. Jaeger. [continuing] for those particular products,
then the generics will come onto the market.
Mr. Bilirakis. So generics have been concocted, have been
manufactured and what not, and they are in the pipeline.
Ms. Jaeger. Right. And those are the applications pending
before FDA on a number of those products.
Mr. Bilirakis. All right. Thank you. Thank you. Let us see.
Mr. Shimkus?
Mr. Shimkus. Thank you, Mr. Chairman. I will be brief.
There are three things I want to mention. Obviously, I want to
get into the CAFTA debate a little bit just because, one, what
this debate on this trade agreement is to lower tariffs, in
fact, get our tariffs down to zero. I mean the tariffs into our
country by what we import is zero. And what we are trying to do
is lower tariff so we can get our agricultural products, and
our manufactured goods, and our hi-tech and all that other
stuff into these other countries.
And the debate, how this ties to this, is the patent-
protection issues because the patent protections are very, very
important in our hi-tech communities. I mean when we have trade
agreements, we don't want our foreign countries being able to
make bootleg copies of our intellectual music or all of that
hi-tech equipment, so that is where there is a convergence of
this. And so I just throw that out to make sure that we have
that part of the record.
Dr. Perry, in terms of generic utilization rates, how
important of a factor is it that virtually all pharmacy
services are provided in Kaiser facilities by pharmacists that
work for your health plan?
Mr. Perry. I think it is very important in that we have the
clinic experts, the pharmacists and the physicians, working
together, communicating together on both the high-level policy
and on the care of individual members. So the reason we get
higher formulary adherence and higher rates of generic
prescribing is the physicians know that they were involved or
their representatives were involved in developing the pharmacy
initiates. They know that they had expert pharmacy knowledge
involved. We use feedback, but it is really a team working
together.
Mr. Shimkus. Sort of like faith and confidence in the
process?
Mr. Perry. Yes.
Mr. Shimkus. And it allows them to be more involved and
active in this issue, then.
Mr. Perry. Yes.
Mr. Shimkus. And I would concur with my colleague from
Maine. This subject is just very, very frustrating to the
average consumer and person in this country. And I was trying
to sketch out--I am not going to put it in the record because
it is kind of ugly--how this process works. And I have got like
six steps: you have an idea; you kind of go to the market; FDA
approval; patent; patent extension; generics. Where I think
most of us understand that if you are going to do research and
development and capital investment, you have got to get a
return on that, otherwise you are not going to add new drugs to
the market. But I think it is also--we would like for that to
end sometimes so that there is a return on the investment, but
then you don't game the system.
And Mr. Chairman, even in the last Congress, we were
talking about how there was gaming of the system by filing
multitude of patents and extensions and long-lasting--and it is
my understanding that if you have a patent on a formula, a
basic chemical formula for a drug, then that get patented and
the clock should start running. And then, for that formula,
that basic formula, then the generic should go after that time
runs out. Am I misguided in that?
Ms. Jaeger. No, I mean the way this Hatch-Waxman system is
setup is that it actually protects innovation, and it balances
access, and GPhA supports the balance of innovation and access.
So we believe that whether it be free trade agreements or here
at home that we need to incentivize the brand industry to do
the necessary research--true research--to bring novel products
into the marketplace. Where the generic industry sees problems
is when pharma companies game the system. On average,
blockbuster products have about 10 patents covering their drug
product that are listed in what we call the FDA orange book.
Well, our system for generic approvals is a linkage concept,
which it links the generals approvals with the patent
extension.
Mr. Shimkus. Can I stop you? I want to ask a question on
that because that is really the heart of the--premise of--we
all took basic chemistry, and we know there is a basic formula.
How can file a multitude of patents on a basic chemical
formula? If there is one formula? Now, I know there is going to
be long-lasting and encapsulated, that you want to take one
pill a week instead of one pill a day, but that would be a
different formula. So why don't you file a patent on that
single formula? Or how can we allow multitude of filings of
patents on a simple, chemical formula?
Ms. Jaeger. Well, in the United States, the patentability
requirements are quite broad. We actually have the broadest
patentability requirements in the world, and brand pharma will
actually patent every attribute of that product as well as sort
of----
Mr. Shimkus. Define every attribute. I guess that is the
issue. If there is a basic chemical formula----
Ms. Jaeger. Um-hum.
Mr. Shimkus. So they are also patenting whether it is a
round pill or encapsulated or----
Ms. Jaeger. Whether it is a round pill----
Mr. Shimkus. [continuing] or it is liquid or----
Ms. Jaeger. Where they will basically patent the process of
the product. They will patent how it metabolizes at certain
times. They will patent various polymorphs, isomorphs. They
will patent their formula, itself, what it is for.
Mr. Shimkus. And if they find a difference usage, then they
will patent it for the different usage.
Ms. Jaeger. They will patent it for that as well.
Mr. Shimkus. Mr. Chairman, I would just suggest that we
look at--and it is actually a different committee's
jurisdiction. But if you want to patent a chemical a chemical
formula, we ought patent the chemical formula and work with the
judiciary and not allow all of this gaming of the system
through the patent system. And I yield back my time.
Mr. Deal. I thank the gentleman. Ms. Baldwin?
Ms. Baldwin. Thank you, Mr. Chairman. This question is for
Dr. Perry, but if others want to comment, they should feel
free.
Regarding the role of physicians in encouraging the use of
generics: one of the major healthcare systems in the district
that I represent, Dean Healthcare, has really severe
restrictions in place, regarding interaction between physicians
and the pharmaceutical representatives. Dean physicians are not
permitted to have contact with the pharmaceutical reps or to be
given anything--you know, pens, calendars, the knick-knacks, et
cetera--other than free drug samples. The interaction is
permitted on specific occasions where all pharmaceutical reps
are invited to come at a specific place and time, and the
doctors can then approach those representatives at that point
in time if they choose to do so.
Among other things, this policy has the effect of reducing
the numbers of items, like knick-knacks, in a doctor's office
that might advertise brand-name drugs, and hopefully it makes
doctors and patients more likely to consider generics. I ask
what you think about such a policy, whether Kaiser Permanente
has any sort of similar policy or is grappling with it, and
what sort of impact you think widespread adoption of this sort
of policy might have.
Mr. Perry. Partially, we don't want the distraction of
pharmaceutical reps, and the--really should be interacting with
the doctor and not with patient. And so we have restricted
access to the pharmaceutical representatives in the facilities.
All of the medical groups, I know, are moving toward a similar
policy about the restriction of the acceptance of gifts and
knick-knacks and to have various restrictions on the amount of
any type of support for educational activities. So whereas I
would have to look directly at the Dean policy and where we are
evolving, but I think there are similarities.
Ms. Baldwin. Any other comments--Dr. Gottlieb?
Mr. Gottlieb. I was checking my pockets to make sure I
didn't have a drug pen before I answered.
I will say, first of all, I certainly don't see a lot of it
where I practice. I practice in a community hospital where
there aren't thought leaders, and you know if a pharmaceutical
rep comes around with a drug pen, that is about it. There might
be other stuff going on with some of the thought leaders in the
industry, but I think the industry's own code of conducts have
really cut back on a lot of what you might feel would be more
egregious kind of handouts.
Where I am a little bit concerned about the idea of putting
restrictions on the ability of physicians to access
pharmaceutical reps or other scientific resources from the
pharmaceutical companies is that it is part of what I am seeing
as a general trend in the government to regulate the practice
of medicine more broadly. And certainly, the restriction on
access to pharmaceutical reps is really a restriction on access
to information from the people who have the biggest incentive
to try to provide you with that information, and in a lot of
cases the information is valuable, and in a lot cases, the
information just won't get in the hands of the physician
because there is no other party incentivized as strongly to
hand out copies of journal articles or copies of treatment
guidelines or whatever it might be, which is usually the kind
of information that I get passed to me.
I would also point you in the direction of looking at FDA,
at the risk-management policies that the FDA has promulgated,
where they really put significant restrictions on not only the
kind of doctor who can prescribe certain drugs, but when the
doctor can prescribe. And this is really a Federal policy to
restrict access to medicines based on restricting the
physician's access to medicine.
And I think some of the reimbursement policies that are
coming forward that tie reimbursement to certain activities on
the part of the physician are another intrusion in to the
practice of medicine. And so taken as a whole, that alarms me
as a physician, and I think the thought of restricting
information to a physician and doing away with he presumption
that the physician is a learned intermediary and can integrate
the information and won't succumb to clever marketing pitches,
but use the information in a valuable way, I think that is a of
a piece with a broader direction.
Ms. Baldwin. I should stress that I wasn't suggesting this
become a part of law.
Mr. Gottlieb. Okay.
Ms. Baldwin. But you know it is certainly a trend in the
industry for policy.
Mr. Perry. I think it is--in terms of the Permanente
Medical Group, we are ensured that physicians have access to
the best medical knowledge that is not driven by commercial
concerns. And so we will find various mechanisms to do that.
And we are also going to make sure that there is nothing from
outside entities to interfere with out physicians interacting
in an effective manner with our members.
Ms. Berger. We have actually taken a page from the
pharmaceutical manufacturers' books, and we actually have
pharmacists who go in and talk about generics with physicians
and education them around the generics. So you know, they were
successful in what they did, and we have taken it in a little
different route, and that is one of the methodologies. We have
between 125 and 150 pharmacists, who go in; educate the
physicians around generics, the use of generics, and actually
give them specific tools they can use in remembering how to
prescribe generics in their practice.
Mr. Deal. The gentlelady's time has expired. Mr. Ferguson?
Mr. Ferguson. Thank you, Mr. Chairman. A couple of quick
observations--and I don't think my colleagues are here who
raised these before.
Mr. Allen was talking about the chart about the top 50
drugs and how so few of them actually have generics. I don't
think there is any mystery there. If a drug gets a generic, it
is going to fall off the top-selling list. So I don't know what
is so illustrative about the chart.
And my friend Mr. Shimkus, before, was talking about gaming
the system and the patent business. Obviously, nobody thinks--I
think very few of us would say there ought to gaming of the
system, but I what is not frequently talked about is half or
more of patent life is eaten up before that firm makes dollar-
one on that drug. So I think, obviously, no one thinks we
should be gaming the patent system, but we should also
recognize the fact that the enormous resources, the hundreds of
billions of dollars that go into finding these new drugs--that
patent clock is ticking as soon as the patent is approved, not
when that drug goes on the market. I think that is an important
point that ought to be made.
Another point that I don't think has been talked about
today is the difference between generic substitution and
therapeutic substitution. And I think this is very important to
some of the things that we are talking about today. And when we
are talking about generic substitution, as we are today, we are
not talking about therapeutic substitution.
Substituting a generic copy of a brand-name medicine, which
is generic substitution, is wholly different than therapeutic
substitution, which is substituting one medicine--whether it is
a brand or generic--for another different medicine. Generic
copies of brand-name drugs are not equivalent to all brand-name
medicines in the same class. Even within a class of drugs that
work in the same fundamental way, drugs can have different
indications and side effects for patients, even patients who
are suffering from the same condition.
Because of the differences between medicines within in a
class, encouraging patients or forcing patients or coercing
patients to change medication, particularly to one that has not
shown an effectiveness in treatment of that patient's
condition, could result in a harm to that patient's health.
And that is where I want to ask Dr. Gottlieb: we have heard
that characteristics of a patient may affect how a given
medicine works and that use of a different medicine may have
bad effects--in fact, can disastrous effects. Can you give us
an example or two, or do you have any experience in this
regard, of instances where two medicines cause a different
reaction? And maybe tell us a little bit about how severe those
reactions could be.
Mr. Gottlieb. Absolutely. And I touched briefly on this
point before, when I was talking about that--not just generic
substitutions, but the way plans design their formularies by
lumping different classes of drugs together for the purposes of
lumping a new class of drugs, perhaps, with a class that has
some older, generic alternatives that you could then opt the
patient onto.
A good example of this is the ASE inhibitors and the ARBs,
two classes of antihypertensive medication that for most
patients probably have similar benefits if you are prescribing
it just for blood pressure lowering. But for certain patients,
those drugs have quite different profiles. There are reasons
why you might want to prescribe one to a diabetic patient with
certain kidney problems.
But even when you look in the existing classes of drugs,
like statins, for example, lipid lowering statins, you see
high-dose statins and low-dose statins. You see statins that
work in different ways and are co-formulated with different
molecules. And there are very good reasons why, as a physician,
you would opt to put a patient one drug versus another, and the
decision is being made at the formulary level, and the designs
of a lot of formularies at lot of plans really are taking away
that kind of decisionmaking.
So it is not just a question of whether or not the plan is
going to put you on the new calcium-channel blocker versus the
old calcium-channel blocker, that are largely equivalent
molecules--or in fact, the same molecule because it is just a
generic version of the branded drug--but the decisions that are
being made are the decisions that you pointed to, which are
decisions to substitute drugs that are either in another class
or within the same, broad class, but in fact, have much
different profiles. And the examples in medicine are just as
countless where for a certain percent of patients, the
different drug will make a difference. You know, we always say
for 95 percent of patients or 90 percent of patients, it might
not matter; but the 5 or 10 percent of patients who it does,
that is where you want to have very easy ways to opt around the
kinds of restrictions that the plans sometimes put in place.
Mr. Ferguson. Dr. Berger, how does this work in practice?
How does therapeutic substitution work in practice? Are there
incentives that you offer to either doctors who are prescribing
the drugs or to pharmacists who are filling the prescriptions
with regard to therapeutic substitution?
Ms. Berger. No, there are no incentives. We do, in some
classes and in some cases, do therapeutic substitution, where
we call the physician and ask them would this be a clinically
appropriate consideration for them. But as I said earlier, at
the end of the day, it is always the physician's decision
because they do know the patient best.
Mr. Ferguson. Is there a tone of voice in that call?
Ms. Berger. What? What was that?
Mr. Ferguson. I said is there a tone of voice in that call?
Ms. Berger. No, and actually we have team that oversees to
make sure there is no tone of voice. The other thing, I want to
take a step back----
Mr. Ferguson. So there is an accent, but no tone of voice?
Ms. Berger. There you go. The one thing I do want to say
and take this a little further is any of the activities that we
do, including requests for therapeutic substitution, go through
our P&T Committees, our Pharmacy and Therapeutics Committee,
which is a 100-percent external committee to anybody within
Caremark. It is physicians across specialty, across the
country. It is pharmacists. It is a dean of a pharmacy school.
And they make the decision that this is a reasonable question
to ask. Then, that goes forward in those cases to the physician
to say is this reasonable, and the physician makes the
decision. The physician is not incentivized, nor is a
pharmacist, into doing anything different than what they feel
is appropriate.
Mr. Ferguson. And is this your policy in your practice
because you recognize the risks of therapeutic substitution and
the problems that that can cause?
Ms. Berger. We feel it is the clinically correct way to go.
Mr. Ferguson. Thank you, Mr. Chairman. My time is just
about up, but I just wanted to, again, stress that as I
understand it, this is not wise. It is in many cases, as we
have heard, a dangerous practice. And certainly, we should be
making sure that folks who are in the business, as you are--a
crucial position of being a part of that decisionmaking chain
about what medicines patients end up getting, that we make sure
that we really draw this distinction on a policy level and a
practice level, the difference between generic substitution and
therapeutics.
I thank you, and I yield back.
Mr. Deal. Thank the gentleman. Mr. Strickland.
Mr. Strickland. Thank you, Mr. Chairman. I think the reason
that so many of us love this committee is the fact that what we
discuss here effects, directly, the lives of our constituents.
Dr. Gottlieb, you said a few moments ago that--you made
reference to the fact that you may be concerned that government
is starting to interfere with the practice of medicine. And
some years ago, we had a TV ad where a sweet lady with white
hair said, ``I don't want the government in my medicine
cabinet.'' But I think we don't want the pharmaceutical
companies determining what is in our medicine cabinet or the
insurance companies determining what is in our medicine cabinet
either. We want our physicians making that decision.
Which leads me to my experience with my 79-year-old sister
last weekend, who had a blood pressure problem, and she gets
her medicine through the mail, and it didn't show up as it was
scheduled to show up, and so when she puts through a call she
was told that, we no longer pay for that medicine. We asked
your doctor if he would agree to a substitute; he said no. And
then, they asked her--they said, do you want it, because you
will have to pay for all of it. And she said, well, of course,
if my doctor wants me to take it, I want it. So I think there
is problem out of the hands, away from the judgment, of those
who are capable of making the decisions.
In my own case, with the statin medication--I took a statin
medication for cholesterol for over a year, and it did nothing
to lower my cholesterol level. And then I was changed to
another one, and immediately, it was dramatically lowered, with
no change in my behavior or my eating habits. I don't know how
to explain that. Maybe you can as a physician.
But having said those things, I have one particular
question, and I think this has been answered to some extent,
but I want to make it as crystal clear as I can. Name-brand
companies can diminish generic drug companies incentive to
challenge patents or to develop the generics by marketing
virtually identically versions at a lower cost, thereby
directly competing with a company that has developed the
generic by using the so-called authorized generic drugs. Now
this, obviously, would have a disincentive for companies to
pursue the development of a generic drug.
In your opinion--and any of you can answer this. But in
your opinion, do authorized generics impact the incentives to
develop what I would call true generic drugs? And if that is
the case, what can we do about this? And if we do nothing, what
will be the result?
Ms. Jaeger. I shall take that question.
Authorized generics are basically brands masquerading as
generics, and they do come in and they are tying to compete
with the generic. And what they are doing is devaluing the 180
days of generic exclusivity, and that is the exclusivity that
is rewarded to the generic company for challenging those
patents and being successfully in going to the marketplace.
But if a generic company is not guaranteed that 180 days,
they are going to have to look long and hard about how many
challenges they bring in the future. Now, there may be a short-
term gain, and the opposition will say, you are getting some
competition; but it is the long-term consequences to our
healthcare system that are at stake here. And so we believe
that authorized generics, the whole process, should be stopped,
and 180 days exclusivity should be just that, excusive,
exclusive for the generic manufacturer.
Mr. Strickland. Do the others agree with that answer, or do
you take exception?
Ms. Gottlieb. Well, I am by no means an expert in this
area. But you know it should be noted, just generally, that a
lot of the recent court cases have gone in favor of the branded
companies on their policy here. I understand Ms. Jaeger's
position and have heard some of the criticisms of the FDA's own
posture in this area, but the court cases have spoken pretty
clearly about whether or not the branded companies have the
ability to do this as a commercial activity.
Mr. Strickland. Anyone else? If not, I would just like to
say, Mr. Chairman, that this may be something that we need to
address because I think it gets to the very heart of whether or
no generics are going to be incentivized. And if they aren't,
they are not likely to be developed. And if the courts are
making certain decisions, perhaps it is appropriate for us to
consider legislation----
Mr. Deal. Would the gentleman yield on that?
Mr. Strickland. I would yield.
Mr. Deal. I think there is an amplification of that issue
that Ms. Jaeger touched on in her opening statement. It might
deincentivize that.
As I understand it, you are advocating that these
alternative generics be included in the computation of the best
price, which would significantly change the rebate formulations
that are used. Is that correct?
Ms. Jaeger. That is correct.
Mr. Deal. That is a complicated question. If you would like
her to explain what it meant, I shall be glad for her to do it
on your time. I think we have got a little bit left.
Mr. Strickland. You want her to tell you what you asked.
Mr. Deal. Tell what I just said; that is right. But you
would agree with that?
Ms. Jaeger. And Mr. Chairman, we also just wanted to
correct the record. Our industry does challenge patents, and
for the most part--the FTC put out a report a couple of years
ago and said that the generic industry did prevail in about 75
percent of the cases they actually brought into court. Now, we
certainly don't win on every patent, but the vast majority we
do actually win on. And so a lot of these patents are not the
basic compound patent; they are not the formulation patent;
they are not the indication of use patent. There are actually
peripheral patents out there that are actually just needless
barriers to generic entry. And so it is imperative that the
generic industry be able to challenge those patents and be
rewarded. Otherwise, the companies decide not to take on those
challenges; they sit on the sideline; and we have just given
the brand company de facto patent extension. So again, that
would be very, very harmful to the healthcare industry.
Mr. Deal. Thank you. Ms. Myrick?
Ms. Myrick. Thank you, Mr. Chairman. And thank you all for
being here. I am sorry I missed your testimony, but we have got
the written one.
And I have got a question on something that Dr. Gottlieb
had said, and really if Dr. Berger or Dr. Perry or both of you
want to answer--and it is related to brain disease drugs--or
some people call them mental disorder drugs. But Dr. Gottlieb,
I understand that in your testimony you stated that, in
general, generic use among people with a brain disease has been
relatively low. Is the low generic-substitution rate due to the
physical differences between the brand-name and generic drugs,
or would you say there are other factors that make brand names
more prominent for mental health-type prescriptions?
Mr. Gottlieb. I am actually not sure that the mix between
generic and brand drugs in the different--at least in
depression, I would imagine that it is exactly as you state,
that the overwhelming use is in branded drugs. I think there
are certain areas of medicine where the prescriptions choices
of physicians are more finely tuned to the patients, and mental
health happens to be, perhaps, at the top of the list or near
the top, maybe with the exception of cancer and some very
specific diseases, because the drugs, by and large, within the
classes have subtly different profiles that become very
important in trying to match the drug to a patient's particular
tolerance. So for example, Prozac might have more sexual side
effects than a newer drug, and you might not want to give it to
a young patient if you are worried about compliance. Some of
the typical antipsychotics might have a greater propensity for
patients to gain weight. You might not want to give one to a
patient who is worried about weight gain. One of the typical
antipsychotics that is used to treat schizophrenia is more
sedating, so you might want to give it to a patient who is more
agitated. One of them, I know, makes you more agitated, so
might want to give it to a patient who is sedated.
And so these become very subtle choices that the doctor
needs to make, and by and large, since you don't have a lot of
generic drugs in these classes, if you are going to make very
specific prescription choices, closely matched to the patient,
you are not going to just push everyone toward the generic
drug, just for economic reason in this kind of a therapeutic
category, where you are really considering the patient's
characteristics in how you are prescribing.
Ms. Myrick. Is it possible to make nearly exact generic
copies of some of these drugs?
Mr. Gottlieb. Well, most of--I am thinking of the typical
antipsychotics. They are all on patent. The older
antipsychotics are off-patent, a drug like Haldol, but has a
very different safety profile than the newer ones, the ones
that are called atypical, so most physicians wouldn't want to
use it as a first-line agent, except in specific circumstances.
And with the SSRIs, selective serotonin reuptake
inhibitors, for example, there are--there is a drug off patent.
There is more coming off patent. But again, the drugs have very
specific characteristics, so there might be a reason that you
might opt, in that kind of a therapeutic class, for some of the
branded drugs, even though the generic exists, because the
branded drug might have a slightly different profile.
So when the patents are up on the entire class, certainly,
but right now, a lot of those drugs are still under patent
protection.
Ms. Myrick. For the other doctors: is this, when you have
to deal with this type of thing, with a brain disease type of a
problem, do most doctors take this into consideration when they
are prescribing, and do most insurance companies literally
accept that? Or is there a challenge with the insurance
companies saying, well, I shall pay for Zoloft, but I won't pay
for Prozac or something like that--because I know exactly what
Dr. Gottlieb said. There really is a difference in how they
affect, and there is so much trial and error in this field
anyway, and if you find one that works, it is really a
challenge, so----
Mr. Perry. Let me speak to the most common mental health
issue, and that is depression. And we do, in depression, have,
I believe, three of the drugs that are now generic, and we also
have brand drugs to treat depression.
In a large review of multiple studies that was done
recently, the conclusion was that you did need to have a range,
but there was no one magic bullet; that it is perfectly
permissible to start with one of the generics; and some people
will respond to that; and about 20 percent of people will not.
And then you can try another generic, and some will respond and
some will not. You can go to a more expensive brand drug, and
about the same percent will respond and the same percentage
will not.
Ms. Myrick. Really?
Mr. Perry. And so what we have done with our formulary is
have a range of options. We do encourage the generics, but we
have a range of options, knowing that people respond
differently. And so I thin it is perfectly permissible, if you
know your patient, to start with a generic, but there are some
people that you ay not. But again, I think a generic strategy
is a ration way to go.
Ms. Myrick. Would you agree?
Ms. Berger. Absolutely. It is the same way that Caremark
looks, especially at the antidepressant area. And we have found
that as we educate physicians that there are generics in that
class and to begin with them, we are seeing a greater uptake on
the use of generics as a first line----
Ms. Myrick. Right.
Ms. Berger. [continuing] with the knowledge and great
success. But we also don't tend to intervene once somebody is
stable on an antidepressant, asking them to go to a different
generic.
Ms. Myrick. Thank you very much. I yield back, if I have
time.
Mr. Deal. I believe you had another response. Would you
indulge his response on that? Dr. Gottlieb, if you wanted to
make a comment?
Mr. Gottlieb. I was just going to make the observation that
in some areas of medicine, you only get a limited opportunity
to get the patient feeling better or else they fall out of your
care. And this is one of those areas of medicine where you have
a very--and with a lot of patients, you have a very narrow
window to get it right because if they don't feel like they are
getting better, they just won't--they will fall out of
treatment. So if you think that you are making a decision where
you are matching a drug closely to the patient, you would want
that to come into play right away and not have to be forced
into a certain treatment paradigm, just on economic
considerations.
Mr. Deal. That is where you said you do not think the Fail
First approach is not appropriate here?
Mr. Gottlieb. No, not here. I think that the overwhelming
evidence that I have looked at is that Fail First in this realm
could, in fact, end up increasing cost instead of saving it,
and not maximize overall public health benefit.
Mr. Deal. Thank you. Mr. Shadegg?
Mr. Shadegg. Thank you very much, Mr. Chairman. I want to
begin by saying thank you to the panel. This is phenomenally
complex. I am sorry I wasn't able to be here at the beginning
for your testimony.
It is difficult, sitting here, to know how to proceed and
how to do what is right for the consumer. I personally feel
that the No. 1 consideration ought to be the recommendation of
the physician; but that ought not to be influenced improperly
by a formulary. Yet I think a formulary that guides both
physicians and patient to the least expensive, effective drug
is the right thing to do. And so it seems to me that it is very
difficult to find that precise balance. I also would want to
encourage the use of generics where they can be used
effectively.
Dr. Perry, Dr. Berger described the process by which her
company goes through making a decision to allow someone to use
something that is not on a formulary and trying to make sure
that that decision is ultimately made by the physician. Do you
agree with--does your company operate in the same fashion?
Mr. Perry. Let me describe how we operate.
Mr. Shadegg. Okay.
Mr. Perry. And I think that would be the best. We do have a
large formulary; there is one formulary. So the advantage of
being a Permanente physician is that there is only one
formulary that we have to deal with. And I do hear my
colleagues out in the general medical community when they have
six or seven or eight they have to deal with. But there is one
formulary, and it is a large formulary.
But when the physician wants to prescribe a non-formulary
drug, our process is that he or she writes that medication
out--I am talking about our process in my medical group--and a
30-day supply is given, no questions asked. And then, the
physician is asked to submit some documentation on the reasons
why that prescription was written, and again, very high
approval rate on this exception process because our physicians
already bought into the formulary. They know their
representatives developed it. It was evidence-based; it was
based on the literature. And so when they write that
prescription, there is usually a very good and rational reason,
and so we have this exception process that is not a pre-
approval process.
Mr. Shadegg. Ms. Berger, does that parallel what you do,
then?
Ms. Berger. No. Because of our formulary being what we
would call an open formulary, every drug is available. If it is
FDA approved, it is available to the participant. What their
out-of-pocket cost is is what is the alternatives of drugs----
Mr. Shadegg. It is a variant?
Ms. Berger. [continuing] on the formulary--so it is a
varied--you know, whether you want to call it tiered or varied
methodology of out-of-pocket cost, and that is determined by
our clients, by the health plans or the employers who chose to
utilize Caremark.
Mr. Shadegg. Two things concern me. One is doctors who want
to keep the plan happy so they never write a script out of the
formulary because they just want to keep the plan happy because
they figure keeping the plan happy is the way to stay employed.
And sometimes, there is a danger that the patients' health
becomes secondary to that factor. That is one that concerns me.
The second one that concerns me is demand-pull advertising.
And you know I am a First Amendment guy, but I have some real
problems with demand-pull advertising, and I guess I am
interested in how you see that affecting what you do each day
and how you get the doctors--the doctors I know tell me that
they have to fight demand-pull advertising with patients who
come in and say, well, I need this drug. And then they have to
get into an argument with the patient about whether or not, in
fact, they need that drug. Do you have a comment?
Ms. Berger. It is a challenge. We do--again, getting back
to those 150 pharmacists that we utilize to sit with the
physicians and educate them. We use that as an alternative way
of educating physicians and supporting them when the patient
does come in and say, I saw X on TV, and I want that. And so it
is a big issue.
I think the one other thing that is a hard challenge--at
the end of the day, generics are very patient-friendly because
the No. 1 reason we hear people don't take their medicine is it
costs them too much. And so if we can find the methodology
where it costs them less--and you know, Dr. Gottlieb talked
about people staying adherent or compliant to medicine. If we
can find ways to get the medicines that they can afford to stay
on--you know. And that is the thing we try to work with the
physicians on because most of us as physicians, including
myself, don't have a clue how much the drugs cost or how much
each of our patients are paying for each drug that we are
writing for. And so that is a challenge.
Mr. Shadegg. Dr. Perry, what impact do you see form demand-
pull advertising?
Mr. Perry. Let me speak as a physician first. I understand
what your friends are saying. It really is when you are trying
to deal with somebody's diabetes, what they want to talk about
is the ad they have torn out of the paper, and you are talking
about getting them to have better diabetes control. So it is a
significant issue. And we try to interact by having great
patient-education material, helping our Permanente physicians
with those difficult conversations, so they can take what is
the desire of the member to get better and focus it away from
the ad and focus in on how do I improve my own care? So we have
course; we have classes. We have ways to try to build that
skill, but it does have a significant impact when I am sitting
in front of a patient.
Mr. Shadegg. Dr. Gottlieb did you--it looked like you were
jumping to make a comment.
Mr. Gottlieb. Well, I have certainly heard the concern that
you are expressing when I was at FDA, and we undertook studies
during that time, before that, and since to look at what impact
advertising was having on the doctor-patient relationship and
the predilection to use certain drugs, and the overwhelming
evidence that FDA was able to accumulate in its own survey data
was that most physicians didn't really feel it was an intrusion
into their relationship with the patient or a significant
burden on their time. And that was offset by significant
evidence that advertising drove patients into the physician's
office and prompted them to seek treatment for things that
might not have otherwise been aware of, and that was a
significant, overall, public health benefit.
Now, that said, there are probably things that we can do to
try to create a regulatory environment that allows for, if not
encourages, the creation of more ads that are diseased-focuses,
that are help-seeking, that encourage patients to be aware of
specific conditions and away from advertising that just might
be more promotion in nature for a specific product and doesn't
have an educational component, but that is a function of the
way in which advertising is regulated, I think, to be looked
at.
But to certainly think of limiting the adverting, I think
the public health argument there would be that it would
probably do more harm than good.
Mr. Shadegg. I thank all of you. I am way beyond my time.
Thank you, Mr. Chairman.
Mr. Deal. Thank you. And once again, thanks to all of the
panel members for your patience with us. And we have had fairly
good attendance. We just come and go like the weather
sometimes.
With Mr. Brown's indulgence, I would like to raise one
issue--and I don't expect it to be answered here, but I feel
sure your association might want to provide us with a written
response to it.
My concern is the TEVA case--I guess it is--that, as I
understand it, is not appealed to the Supreme Court. As I
understand that case, it says that the fact that a drug is in
the orange book list, and somebody has come in with a generic
application in the 45-day window period and no suit has been
file, that the fact that there is a patented drug out there,
that that in and of itself does not create sufficient
controversy for a declaratory judgment action.
I think our intention was that it would be a situation
where declaratory judgment would be proper. Otherwise, the
generics operate under the cloud of a trouble/damages lawsuit
down the road.
Would you be so kind--and any of you who else might have
some involvement in that--would you be so kind as to provide us
some insight as to what the impact of that might be and what
solutions, if any, might be appropriate?
Ms. Jaeger. We'd be absolutely thrilled to do that, sir.
Mr. Deal. And also, in conclusion, I want to thank Mr.
Brown for his being here for the hearing. He was here longer
than I was today. I had to go to the floor. I apologize for
that.
There are certainly things that we did not cover that are
very closely related to your testimony today, and biogenerics
being one of those. And with Mr. Brown's cooperation and
assistance, I would look forward, maybe, to having a hearing
that would focus on that particular issue. It is very
different. It is more complex, and solutions might be more
difficult to arrive at. But I do think it is a timely issue,
and perhaps, we can work together to have a future hearing on
that, and some of you may be invited back for that one.
But for this, for today, thank you very much for our
attendance in our hearing.
Ms. Jaeger. Thank you.
Mr. Deal. The committee is adjourned.
[Whereupon, at 3:24 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of National Association of Chain Drug Stores
Chairman Deal and members of the House Energy and Commerce
Committee Health Subcommittee, the National Association of Chain Drug
Stores (NACDS) is pleased today to offer our perspective on the value
of generic pharmaceuticals, their potential to achieve significant cost
savings in the U.S. healthcare system, and the role of community
pharmacists and chain pharmacies in helping to address the rising cost
of prescription drugs by encouraging use of generics.
The National Association of Chain Drug Stores (NACDS) represents
the nation's leading retail chain pharmacies and suppliers, helping
them better meet the changing needs of their patients and customers.
NACDS members operate more than 35,000 pharmacies, employ 108,000
pharmacists, fill more than 2.3 billion prescriptions yearly, and have
annual sales of over $700 billion. Other members include--almost--1000
suppliers of products and services to the chain drug industry.
the value of generic pharmaceuticals
The United States health care system values the contributions made
by brand name pharmaceutical companies in providing the innovative
therapies that many of us rely on to maintain life and health. Brand
name pharmaceuticals are priced at a premium, in part, to help brand
name manufacturers pay for their research and development costs.
Alternatively, prices for generic drugs are typically much lower
because generic drug makers do not face the same developmental costs as
do brand name drug makers.
In contrast to the brand name drug market, where there may be a
single source of supply, and pharmacies are ``price takers'', in the
generic market, retail pharmacies are ``price makers.'' As more and
more versions of generic drugs are approved, retail pharmacies create
the competitive pressures that force generic manufacturers to compete
on price, lowering the overall generic prescription prices for cash
paying individuals, as well as public and private payers.
In 2004, the average price of a brand name drug was $96.01, while
the average price of a generic drug was $28.74--roughly 30 percent of
the average brand name price.1 Generics in the United States
are also competitively priced relative to drugs in other countries. An
FDA analysis compared the seven most often used generic prescription
drugs for common chronic conditions in the United States. For six of
the seven drugs, the generics were priced lower in the United States
than the brand name versions in Canada. Five of the seven U.S. generic
drugs were also less expensive than the Canadian generics.2
---------------------------------------------------------------------------
\1\ NACDS, Industry Facts-at-a-Glance, on the Web at http://
www.nacds.org/wmspage.cfm?
parm1=507. Last accessed May 16, 2005.
\2\ FDA Consumer Magazine, July-August 2004.
---------------------------------------------------------------------------
generic pharmaceuticals offer dramatic savings
Simply based on the average prices, use of generic pharmaceuticals
instead of their brand name equivalents clearly is a cost-effective way
of achieving savings in both private and public health care programs.
Seventy-three percent of drugs listed in the FDA's Orange Book have
generic counterparts.3 In recent years, generic versions of
a number of leading prescription drugs have been introduced. Today,
roughly half of all prescriptions are filled with generic drugs.
However, in 2004, brand pharmaceutical sales in the United States
totaled $235 billion while generics accounted for just $18.1 billion in
sales.4
---------------------------------------------------------------------------
\3\ Generic Pharmaceutical Association (GPhA), ``Generic
Pharmaceutical Facts at a Glance.'' On the Web at http://
www.gphaonline.org/aboutgenerics/factsabout.html. Last accessed May 16,
2005.
\4\ IMS Health
---------------------------------------------------------------------------
Given the volume of generic drugs on the market today, it might be
assumed that the percentage of all prescriptions being dispensed with
generic equivalents--as well as spending for generics--might have
increased. However, both percentages have remained relatively flat over
the last few years.
Prescription growth for generics remained at 10 percent in 2004 for
the third straight year and sales of generics constituted only 8
percent of U.S. prescription drug sales.5
---------------------------------------------------------------------------
\5\ 2004 Year-End U.S. Prescription and Sales Information and
Commentary, IMS National Sales Perspectives, February, IMS Health,
2005.
---------------------------------------------------------------------------
Similarly, although many state Medicaid programs have passed laws
mandating the prescribing of generics, 6 data from the
Centers for Medicare and Medicaid Services reveal the average state
Medicaid generic dispensing rate was still only about 51 percent for
the 12-month period ending September 2004. Generics accounted for less
than 17 percent of all Medicaid expenditures for prescription drugs
over that period. States can increase their use of generics by
implementing step therapy programs in the appropriate cases where a
lower-cost generic might be tried first instead of a higher-priced
brand name drug. We believe that there are significant savings to
Medicaid from adopting step therapy approaches used by the private
sector, and we will be discussing these ideas with policymakers during
the upcoming Medicaid debate.
---------------------------------------------------------------------------
\6\ Medicaid Outpatient Prescription Drug Benefits: Findings from a
National Survey, 2003, J.S. Crowley, D. Ashner, and L. Elam, Kaiser
Commission, 2003.
---------------------------------------------------------------------------
A 2001 study by the Center for Pharmacoeconomic Studies at the
University of Texas estimated that a 10 percent decrease in the rate of
brand name dispensing would save $16.6 million across Texas each
year.7 Given continued growth in drug prices and
utilization, even greater dollar savings could be achieved today. The
FDA estimates that drug costs per day for ``typical'' patients can fall
by 14 to 16 percent if patients use generics instead of branded drugs,
depending on their medical needs, while patients whose needs can be
fully satisfied with generics could experience reductions of 52 percent
in the daily costs of their medications.8
---------------------------------------------------------------------------
\7\ Estimating the Economic Impact of Increasing Generic
Substitution of Multi-Source Brand Name Prescription Products in Texas:
Policy Report, Center for Pharmacoeconomic Studies, The University of
Texas at Austin, May 2001.
\8\ FDA Center for Drug Evaluation and Research, ``Savings From
Generic Drugs Purchased at Retail Pharmacies' On the Web at http://
www.fda.gov/cder/consumerinfo/savingsfromgeneric
drugs.htm. Last accessed May 16, 2005.
---------------------------------------------------------------------------
Generic drugs can also help slow the annual increase in drug
spending. A recent GAO study found that average usual and customary
prices for brand drugs increased about three times faster than for
generic drugs. Between January 2000 and June 2004, average prices for
52 frequently used brand drugs increased by 26.4 percent, a 5.5 percent
average annual rate of increase, while prices for 47 frequently used
generic drugs increased 8.3 percent, a 1.8 percent average annual rate
of increase.9
---------------------------------------------------------------------------
\9\ GAO, ``Prescription Drugs: Trends in Usual and Customary Prices
for Drugs Frequently Used by Medicare and Non-Medicare Enrollees'' GAO-
05-104R (October 6, 2004).
---------------------------------------------------------------------------
Potential savings from generic substitution should significantly
increase when several high-volume brand name drugs come off patent
between now and the end of 2007. For instance, top-selling brand name
drugs Nexium (GERD/ulcer), Pravachol, Zocor (cholesterol), and Zoloft
(antidepressant) are all expected to come off patent. The experience
with Prozac coming off patent in 2001 indicates that the first generics
arriving on the market can be expected to cost at minimum 30 percent
less than their brand name equivalents. Once additional generics enter
the market, the market price for the generic versions of these drugs
will likely be about 60 percent less than the price of the brand name
drugs.
Scheduled Patent Expirations with Significant Generic Substitution Opportunity
----------------------------------------------------------------------------------------------------------------
Scheduled
Brand Name Generic Manufacturer Approximate $ Patent Purpose/
Sales Expiration indication
----------------------------------------------------------------------------------------------------------------
Zofran....................... ondansetron..... GlaxoSmithKline. $800,000,000 2005 Prevents nausea
in chemotherapy
Prevacid..................... lansoprazole.... Tap Pharma...... $4,000,000,000 2005 Gastrointestinal
distress
Zithromax.................... azithromycin.... Pfizer.......... $1,506,000,000 2005 Macrolide
antibiotic
Pravachol.................... pravastatin..... Bristol-Myers- $2,000,000,000 2006 High cholesterol
Squibb.
Zoloft....................... sertraline...... Pfizer.......... $2,250,000,000 2006 Antidepressant
Lamisil...................... terbinafine..... Novartis........ $646,000,000 2006 Nail fungus
Risperdal.................... risperidone..... Johnson & $2,200,000,000 2007 Anti-psychotic
Johnson.
Norvasc...................... amlodipine...... Pfizer.......... $2,000,000,000 2007 Hypertension and
angina
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SOURCE: NFM Research, 2004, published in Drug Store Management, August 2004.
THE ROLE OF PHARMACISTS, PHARMACIES IN ENCOURAGING GENERIC USE
The FDA and many insurance plans provide consumers with materials
encouraging them to contact their physician or pharmacist for
information on generic drugs. Given their expertise, pharmacists can be
valuable resources for physicians and health plans in determining
appropriate treatment and encouraging generic utilization. Pharmacists
work with patients and insurers in many different ways to encourage
generic use.
We believe that the economic incentives for pharmacists to dispense
lower-cost generics must be aligned with the interests of health plans,
patients, and payers. For example, many plans encourage the use of
generics by requiring lower cost sharing on generic drugs as compared
to brand name drugs. Some are waiving the copays for generics. Some
plans provide an increase in the dispensing fee for pharmacies to
dispense a generic drug rather than a brand. Other plans have created
contests to encourage pharmacists to dispense generics. Some plans are
providing generic samples to physicians so that patients start on
generics rather than brand name drugs. All these initiatives help
increase generic drug use and help lower the rate of growth of
prescription drug spending.
Obstacles to Increased Generic Use
While pharmacists in community-based practice settings work with
patients and physicians to maximize the use of lower-cost generics when
they are available on the market, there are many factors that affect
the ability of pharmacists to dispense generic equivalent drugs.
Efforts to encourage greater use of generics may be limited by several
factors. Despite holding generally favorable views concerning generics,
physicians may be less likely to prescribe them due to familiarity and
trust in brands. Some consumers express a reluctance to use them
because of misunderstandings about safety and efficacy. Patients may
not be aware that a generic may be available to treat their condition,
particularly when the generic is a different chemical entity (a
therapeutic alternative) from the medication prescribed.
Extensive direct-to-consumer advertising and physician-centered
marketing by brand name pharmaceutical manufacturers likely influence
prescribing patterns. Surveys have shown direct-to-consumer advertising
to be a substantial driver of consumer preference, with over 50
percent of patients asking their health care pro-
viders to prescribe drugs seen on television.10 Sales forces
and marketing efforts targeted at physicians also tend to be much
bigger for brand drugs.
The rebates paid by the manufacturers of the more expensive sole
source, brand name drugs to PBMs and third-party payors may create
incentives for those payors to switch consumers from inexpensive
generic equivalents--for which the payor does not receive a rebate--to
sole source, brand name drugs for which a high rebate is paid. The
purchaser may perceive greater savings from use of brand name drugs
because of rebates.
Pharmacy benefit managers (PBMs), which manage the drug benefit for
most people with private health insurance, also may have disincentives
to promote the use of generic drugs if they make more money from the
rebates from brand name drug manufacturers. Because PBMs draw a
significant portion of their income from rebates, this switching could
result in a significant over-utilization of sole source, brand name
drugs and under-utilization of generic drugs. Similar incentives may
apply to mail order pharmacies, some of which are owned by PBMs. Many
consumers using mail have chronic conditions and are more likely to
fill the same prescription again and again and may not be informed if a
generic becomes available. Retail pharmacies tend to switch patients to
generics as soon as they become available.
This clearly lowers health care costs for those that are uninsured,
as well as those who are insured because the insured usually pay lower
copays for generic drugs as compared to brand drugs. As a result,
community pharmacies dispense generic drugs in about 50 percent of all
prescriptions filled, while the generic prescription rate for mail
order prescriptions is only about 37 percent.11
We are also concerned, as public news reports have suggested, that
some PBMs may not pass along all the savings from generics because they
charge the plan a higher price for dispensing a generic than they would
pay the pharmacist for dispensing the generic. The plan keeps the
spread, which should have been passed through to the payer and the
patient. This is an issue that Congress should closely monitor as the
new Medicare Part D prescription drug program is implemented.
Summary
With expenditures on health care costs increasing, it becomes ever
more crucial to maximize the substitution of generic drugs.
Emphasizing the broad use of generics should yield significant cost
savings to the prescription drug plans participating under Medicare
Part D, and in turn to the federal government, particularly over the
next three years as a number of top-selling brand name drugs lose their
patents.
We appreciate the opportunity to submit a statement for the record,
and look forward to working with the Committee on policies that make
generic drugs more available and affordable for patients.
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10 Influence of Patients' Requests for Direct-to-
Consumer Advertised Antidepressants, Richard L. Kravitz, M.D., MSPH et
al., Journal of the American Medical Association, April 27, 2005, Vol.
293, No. 16.
11 IMS Health Data, January 2003.