Congress Considers Boosting Generic Drugs with CREATES Act

Published June 3, 2019

The legislation addresses existing laws that make it more difficult for generics to enter the market, says Rachel Schwartz, communications director of the Association for Accessible Medicines, a generic drug industry trade group.

“In about 2007, Congress passed a law that required certain FDA-approved drugs to be more closely monitored to make sure the benefits outweighed the risks,” said Schwartz. The FDA created the Risk Evaluation and Mitigation Strategy (REMS), a drug safety program that the U.S. Food and Drug Administration (FDA) can require for certain medications.

Safety, or Monopoly Protection?

The REMS program was applied to drugs judged to have serious or potentially fatal side effects. One example is Zyprexa, a medication used to treat schizophrenia in adults. The drug was linked to delirium and coma in a small number of patients.  The FDA said the cause of the deaths was inconclusive but because it could not rule out the drug, it issued guidelines in 2015 under REM—restricting administration to certified health care facilities, for example, where patients can be observed after receiving the drug.

While REMS can protect patient safety, says Schwartz, it can also be misused. 

“Our industry supported these programs,” Schwartz said. “Unfortunately, after 2007, some brand-name drug manufacturers realized they could take advantage of a loophole to keep generics from being tested and proven to be just as safe and effective as the brand-name drug.”

Brand-name manufacturers refused to sell samples of the medications to competitors so they could test them and create a generic, Schwartz says.

“The higher the risk of the drug, [the more it] gave the brand-name companies an opportunity to say, ‘We can’t sell you these drugs; they’re too dangerous,'” Schwartz said. “It made no sense. This obviously wasn’t a safety issue—they just didn’t want the competition. They were exploiting a loophole to prevent generics from coming to the market.

“The FDA sent letters to the drug companies telling them to stop this practice so that generics could be developed, but unfortunately, these letters had no legal weight behind them,” Schwartz said.

Closing the Loophole

The proposed legislation would close that loophole, Schwartz says.

“The CREATES Act gives generics companies some recourse against the brand-name manufacturers, so they can purchase these drugs, test them, and bring generics to market,” said Schwartz. 

Schwartz says the legislation would help bring down drug prices for consumers.

“As we all know, generic prescription medications are 85 to 90 percent cheaper than their brand-name counterparts,” Schwartz said. “If the CREATES Act passes, patients will have access to more generics, earlier.”

An increase in availability of generics would also lower taxpayer costs of government health care programs, says Schwartz.

“The CREATES Act will save about $4 billion for government programs like Medicare and Medicaid,” Schwartz said. “More competition lowers prescription drug prices.”

Fear of Litigation

The prominent taxpayer advocacy group Americans for Tax Reform (ATR) opposes the CREATES Act, arguing it will create endless litigation and suppress innovation.

“The CREATES Act modifies the FDA’s Risk Evaluation and Mitigation Strategies (REMS), a regulatory structure that applies to roughly 40 highly advanced, yet potentially dangerous drugs,” Alexander Henrie of ATR wrote in a blogpost on the organizations website in January. “REMS has been carefully enshrined in law to balance safety, innovation, and access to medicines.”

Henrie says the CREATES Act would end up reducing the availability of prescription drugs.

“It would set a precedent that undermines innovation and the safe development of medicines in favor of a system that promotes reckless litigation and grants generic manufacturers the right over an innovator’s creation under threat of lawsuit,” Henrie said. “In turn, this would undermine intellectual property protections, open the door to unjustified litigation, endanger patient and researcher safety, and suppress innovation.”

Schwartz says the bill merely overturns an artificial monopoly some drug companies have created.

“Nothing here undermines innovation,” Schwartz said. “Right now, patent law allows innovators a 20-year monopoly. The reward is there.

“What this bill is really about is addressing patent abuses that artificially extend the monopoly,” Schwartz said. “The brand-name companies have had these drugs on the market for 15 years and have recouped the cost of investment. Unfortunately, not every company is as good at innovating. For many, they have one product bringing in revenue, and want to protect that monopoly. Even President Obama’s HHS Secretary called this ‘gaming the system,’ and it needs to end.”

Better Ways to Fix REMS?

David Hyman, M.D., a Georgetown University law professor, adjunct scholar at the Cato Institute, and coauthor of Overcharged: Why Americans Pay Too Much for Health Care,” says CREATES may not get to the heart of the problem.

“You could fix abuse of the REMS system more simply than having one company sue another,” said Hyman.

“Maybe we say to the brand companies, REMS requires you to provide access to samples automatically to anyone who asks,” Hyman said. “If companies were providing the samples, it is a bit much for them to complain about the possibility of being sued. Reminds me of the definition of ‘chutzpah,'” said Hyman.

Ashley Herzog ([email protected])writes from Avon Lake, Ohio.