May 1, 2001

Public Citizen Applauds Introduction of Schumer-McCain Bill to Make Less Costly Generic Drugs More Widely Available

May 1, 2001

Public Citizen Applauds Introduction of Schumer-McCain Bill to Make Less Costly Generic Drugs More Widely Available

WASHINGTON, D.C. Public Citizen today applauded Sens. Chuck Schumer (D-N.Y.) and John McCain (R-Ariz.) for introducing legislation to provide consumers with much more timely access to less costly generic prescription drugs. The legislation is called the “Greater Access to Affordable Pharmaceuticals Act.”

“This much-needed legislation will make it harder for the major drug companies to use legal tricks to deny consumers the ability to purchase more affordable generic drugs,” said Frank Clemente, director of Public Citizen s Congress Watch. “It will save consumers billions of dollars in coming years from lower drug costs.”

Schumer-McCain closes loopholes in the Drug Price Competition and Patent Restoration Act of 1984 (Hatch-Waxman Act) that have allowed brand name drug companies to keep generic drugs off the market.

Hatch-Waxman was designed to increase timely access to generic drugs while ensuring that drug manufacturers have adequate patent protection to justify their investment in research and development. But loopholes in the act have allowed drug companies to delay generic drugs from coming to market by doing such things as paying firms to withhold generic drugs from the market and filing nuisance lawsuits that automatically delay the introduction of generics. Although the Hatch-Waxman Act has succeeded in opening the prescription drug market to generic competition, generics now constitute less than 10 percent of the dollar value of all prescription drugs sold in the United States, according to the National Institute for Health Care Management.

Solutions in the Schumer-McCain bill include:

• Eliminating the automatic 30-month stay in current law that has allowed brand name drug companies to keep generic drugs off the market by filing nuisance suits. The bill would require that brand name drug companies, just like patent holders in any other industry, prove in court why they ought to be granted a temporary restraining order preventing a competitor s product from coming to market;

• Limiting collusion between brand name companies and generic firms that agree to withhold their drugs from the market. The bill would deny 180-day exclusivity to a generic company if it does not aggressively attempt to bring a generic version of the brand name company s product to market; and

• Requiring entities filing citizens petitions to disclose if they are acting on behalf of a brand name drug company to keep a generic off the market. Such petitions can be filed with the U.S. Food and Drug Administration (FDA) by anyone seeking to prevent a drug from being marketed. Brand name drug manufacturers increasingly use these petitions to keep generic competition at bay. Such petitions can delay the introduction of a generic alternative for a long time because the FDA is required by law to consider each one.

“Brand name hegemony is partly due to the manipulation of the Hatch-Waxman Act by the major drug companies that successfully extend their lucrative patents beyond what was intended by the law,” Clemente said. “Loopholes have led to ever greater profits for brand name firms but exorbitant costs for consumers. The manipulation of the market has to be stopped and this bill will do it.”

The new legislation comes at an important time. Brand name drug companies often charge U.S. consumers nearly twice as much as they charge consumers in other industrialized nations for the same prescription drugs. In the next five years, prescription drugs with annual sales of approximately $20 billion will be coming off patent. Given that generic drugs cost, on average, less than a fifth of what brand name drugs cost under the Medicaid program, the potential savings to taxpayers, consumers and patients from the timely availability of generic drugs is substantial.

Despite the Hatch-Waxman Act s loopholes, the legislation has been successful in saving consumers huge amounts of money by increasing their access to generic drugs. The Congressional Budget Office (CBO) estimates that the first year a generic drug becomes available, it offers consumers a 25 percent savings, on average. The CBO has concluded that Americans saved $8 billion to $10 billion in 1994 alone by purchasing generic drugs. But if the act s loopholes were closed, consumers would save even more, Clemente said.

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