March 13, 2019
House E&C Health Subcommittee holds hearing on reducing barriers to market competition for prescription drugs
On March 13, 2019, the House Energy and Commerce Health Subcommittee held a hearing entitled, "Lowering the Cost of Prescription Drugs: Reducing Barriers to Market Competition," which included the review of several bills before the committee aimed at addressing various delays to drug development and market entry, particularly for generics and biosimilars, and tamping down on anti-competitive practices and system abuses. While several of the bills enjoyed bipartisan support, there was some pushback from committee Republicans that banning so-called "pay-for-delay" patent settlements — in which brand-name manufacturers pay generic drug companies to keep rival products off the market — could have the unintended consequence of delaying generic competition due to protracted litigation. Others committee Republicans argued that legislation intended to make it harder for branded drug companies to abuse FDA safety programs to block generic products would prompt unnecessary lawsuits and that changing the 180-day exclusivity provided for first generics may disincentivize entry. The following bills were discussed:
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Chairman Frank Pallone (D-NJ): "Two of the bills we will be discussing — the Orange Book Transparency Act of 2019 introduced by Rep. Kelly, and the Purple Book Continuity Act of 2019 introduced by Chairwoman Eshoo — would help to increase accuracy and transparency of the two databases that guide development decisions for generic and biosimilar manufacturers. These bills would help generics overcome the barrier of patent listing. Two other bills, the CREATES Act and the FAST Generics Act, led here on the Committee by Reps. Welch and McKinley, would help address the barrier of drug development and market entry. Today, the use of restricted distribution systems, including REMS, by certain manufacturers delays access to samples of branded drug products for development purposes. It also impedes market entry through delays in negotiations on single-shared system REMS. This important legislation would eliminate these barriers … The BLOCKING Act, introduced by Reps. Schrader and Carter, would address delays that occur when first time generics are unable to be approved. This blocks the approval of other generics. The Protecting Consumer Access to Generic Drugs Act of 2019, introduced by Rep. Rush, would discourage the use of pay-for-delay agreements that result in generics delaying development or market entry. And finally, the FAIR Generics Act, introduced by Rep. Barragán, which would strengthen incentives for generic first applicants to enter the market on the earliest possible date and disincentive patent settlement agreements that delay generic entry. These are all commonsense solutions that will remove unnecessary barriers to competition. These bills are a strong first step in making prescription drugs more affordable and providing real relief to hardworking Americans that are being price gouged at the pharmacy counter." Full statement.
Ranking Member Greg Walden (R-OR): "Last Congress, our committee made real progress in getting lower-cost generics to the market, incentivizing and adding competition where it previously didn't exist, and examining the drug supply chain — all because we worked together towards a common goal. Regrettably, while Republicans share the goal of the today's hearing — lowering the cost of prescription drugs — the process has been anything but inclusive. Today, we're considering seven bills, but only three have Republican cosponsors. That's largely because we didn't even get a list of these bills until just eight days ago. And then, we were given just 24 hours to help identify potential Republican cosponsors. By my count, this subcommittee has reviewed 14 bills this Congress. Just four have Republican co-authors. That's a disturbing trend. Equally concerning, the bills we are examining today each represent complex modifications to the Food, Drug, and Cosmetics Act and the FDA is not even serving as a witness. A legislative hearing is the only public opportunity to hear from experts on the policies being advanced, and we will not have the agency responsible for implementing such technical policies present. Madam Chair, is there a reason we're not hearing from the FDA experts? Can you commit that this subcommittee will have an opportunity to get the agency's expert advice and counsel before members are required to vote on these bills? I know you care deeply about getting public policy right, and we stand ready to work … on these important matters. American consumers need our help to get medical costs down and consumer choice up." Full statement.
Lou Kennedy, CEO and Owner, Nephron Pharmaceuticals: "Nephron believes drug patents should be controlled by a patent approval system that reasonably rewards innovation, but also incentivizes appropriate patent challenges, particularly for Orange book listed patents. A fair playing field would ensure erroneously granted patents are not used to prevent generic competition and maintain monopoly drug prices to the detriment of American consumers … The FAIR Generics Act, HR 1506, would achieve the needed broader fix of the parking problem by allowing subsequent applicants that win their patent challenges to share the 180-day exclusivity award with the first generic to file an application challenging a brand patent(s). As such, Nephron urges Congress to take action to fix the broader parking problem, not just a narrow subset of the problem, by enacting legislation along the lines of the FAIR Generics Act … Nephron therefore supports the CREATES ACT (H.R. 965) and FAST Generics Act (H.R. 985), because both promote accessibility of reference product samples, particularly when they are marketed under restricted distribution. In addition, the bills would facilitate the development of shared [Elements to Assure Safe Use (ETASU) Risk Evaluation and Mitigation Strategies (REMS)]." Testimony
Anthony Barrueta, Senior Vice President, Government Relations, Kaiser Permanente: "We are especially grateful the Committee is considering the CREATES Act, which would curb abuses of the REMS program that arbitrarily block generic manufacturers from accessing samples they need to conduct the tests required for FDA approval … More than 91% of drugs prescribed in our system are generic, which exceeds market averages of 89%. Every 0.1% increase in generic utilization saves our system $28 million … Major contributors to our success include our: (1) evidence-driven formularies; (2) ability as an integrated system to generate and disseminate unbiased information about drugs; and (3) restrictive approach to marketing by pharmaceutical sales representatives … Specifically, we encourage you to consider: Whether exclusivities under the Biologics Price Competition and Innovation Act, the Orphan Drug Act and the Best Pharmaceuticals for Children Act could be narrowed to more appropriately balance rewarding innovation with access to affordable medicines; Whether the Federal Trade Commission (FTC) should have more expansive authority to review drug companies' anticompetitive practices … and Whether agencies such as the Food and Drug Administration (FDA), the National Institutes for Health (NIH), the Patient-Centered Outcomes Research Institute (PCORI), the Agency for Healthcare Research and Quality (AHRQ) and others could play a role in providing academic detailing and unbiased sources of information to counter drug company marketing tactics." Testimony
Michael Carrier, Distinguished Professor, Rutgers Law School: "H.R. 965, Creating and Restoring Equal Access to Equivalent Samples Act (CREATES) of 2019, offers a simple fix, allowing targeted lawsuits to obtain samples … H.R. 985, Fair Access for Safe and Timely (FAST) Generics Act of 2019, would allow the HHS Secretary to require access to samples as condition of approval/licensing … Two amendments to H.R. 1499 would make clear that courts cannot undermine the landmark FTC v. Actavis decision … H.R. 1520, Purple Book Continuity Act of 2019, would make the Purple Book searchable, enhancing usefulness." Testimony
Kurt Karst, Director, Hyman, Phelps & McNamara, P.C.: "In my experience, amending and tinkering with the Hatch-Waxman Amendments is akin to performing brain surgery: one wrong move can have dire consequences. So, it is through the 'first, do no harm' lens that I approach the package of bills at issue in today's hearing … The Orange Book is the linchpin of the Hatch-Waxman Amendments and the generic drug approval process … And including — or excluding — patent information in the Orange Book can have a significant effect on the timing of generic drug approval … While the proposed patent information provision of H.R. 1520 is, in my opinion, a good first step to facilitating biosimilar availability, Congress should consider whether a more enhanced patent notice feature should be added to the law … Today, in a highly competitive generic drug market where only a handful of manufacturers may be able to successfully commercialize a drug, 180-day exclusivity is the brass ring. Legislative measures that dilute or obscure that prize could jeopardize the generic drug industry. The BLOCKING Act would do just that … Legislation that bans or severely restricts patent settlement agreements can delay generic competition and lead unnecessarily to time-consuming and costly patent infringement litigation … Both H.R. 965 and H.R. 985 would address the sample access concern, as well as other Risk Evaluation and Mitigation Strategies issues, to establish a system that more effectively facilitates generic competition." Testimony
Jeff Kushan, Partner, Sidley Austin LLP: "In my experience, regardless of the technology at issue, both sides of a patent dispute — the patent owner and the party accused of infringement — have a strong interest in finding a way to settle the patent litigation early in the dispute, even while they are aggressively litigating. Settlements often are the only practical way to secure the certainty companies need to plan and conduct their commercial operations and to avoid the disruptions that occur during litigation … Consequently, measures [that] effectively foreclose the possibility of settling patent litigation once it has started need to be considered very carefully … Uncertainty over how the rules work, whether patents can be effectively enforced and whether the rules will change after investments have been made will have negative systemic effects on the environment for investments in clinical development of original and subsequent versions of drugs and biological products … it is critically important for the ultimate beneficiary of innovation in the life sciences sector — the patient with unmet medical needs — that we maintain the strong incentives for innovation that the patent system provides … Legislation that has the potential to foreclose commercially reasonable settlements, impair valid patent rights, or retroactively penalize entities that acted in good faith under current laws and policies needs to be very carefully considered. In addition, measures intended to accelerate market entry of biosimilar and generic products need to ensure that they do not disincentivize not only development of new drugs and biologics, but the innovations needed to manufacture them and deliver these products safely to the patients that need them." Testimony
Marc M. Boutin, JD, Chief Executive Officer, National Health Council: "In fiscal year 2018, due in-part to NHC-supported provisions included in the FDA Reauthorization Act, a record 1,021 generic drugs were approved or tentatively approved by FDA. 9 To ensure this trend continues, the NHC has supported FDA's efforts to reduce barriers to generic-drug approval. Additionally, we support proposed regulations being considered by the Administration to ensure patients are aware of the availability of generic drugs and lower-cost alternatives in public programs and encourage further action related to formulary transparency. The NHC sees similar opportunities with biosimilars … I highlight two practices limiting the market entry of generic drugs and undermining the intent of current laws and regulations: First is the use of patent settlements (also called for "pay-for-delay" settlements) to prevent timely entry of generics and biosimilars into the market. Second is the use of the FDA's Risk Evaluation and Mitigation Strategies (REMS) program to prevent generic manufacturers from acquiring needed reference materials to conduct testing necessary to secure FDA approval … Increasing competition in the drug market is an important step in the nation's effort to lower health care costs to increase patients' access to needed treatment. But, it should not be the only step. We call upon Congress to consider all the drivers of health care costs and craft holistic policies that can reduce the significant financial burden on people with chronic diseases and disabilities and their family caregivers." Testimony
Chester "Chip" Davis, Jr., President and CEO, Association for Accessible Medicines (AAM): "AAM strongly supports the CREATES and FAST Generics Acts. Congress should immediately pass the CREATES and FAST Generics Acts and enact these solutions into law … AAM supports the Orange Book Transparency Act and the Purple Book Continuity Act, and recommends additional transparency and disclosure requirements consistent with our comment letter to HHS be included … AAM opposes the Bringing Low-cost Options and Competition while Keeping Incentives for New Generics (BLOCKING) Act (H.R. 938), the Protecting Consumer Access to Generic Drugs Act (H.R. 1499), and the Fair Access for Safe and Timely (FAIR) Generics Act (H.R. 1506) as introduced. Unfortunately, these proposals, as drafted, would have the unintended impact of reducing generic and biosimilar competition in the prescription drug market and thus lead to patients paying the high-cost of brand-name drugs for longer … Efforts to ensure patients are able to fully realize the savings available from generic and biosimilar medicines on the market today combined with Congressional action to advance policies that increase competition is the ultimate equation to achieving the shared goal of enhancing patient access to more affordable generic and biosimilar medicines." Testimony
Rep. Anna Eshoo (D-CA) asked about improvements needed for the Orange and Purple Books. Mr. Carrier said the Orange Book does not make clear when a patent was invalidated, adding that the FDA does not ensure it is up-to-date. Mr. Kushan said he has concerns about altering the status of drugs before final outcomes of legislation but said they could enhance the searchability. Despite some concerns, Mr. Kushan added that the committee is moving in the right direction towards transparency.
Rep. Michael Burgess (R-TX) said we need to understand the difference between drugs like Sovaldi and Daraprim, or we may come to the wrong conclusions. He said we need to balance the availability of affordable medicines with innovation and potential curative treatments. Mr. Barrueta said the system design has a major impact on launch prices and that the $80,000-90,000 price of Sovaldi was due to the reflection of the old therapy. Rep. Burgess said we are on the cusp of cures and need to think about how best to amortize the cost of research and development, along with innovation. He noted a Guthrie bill that would allow CMS to talk to manufacturers before the FDA approves a dramatically expensive drug. When asked about concerns with REMS, Mr. Carrier said that is not really about innovation.
Rep. Frank Pallone (D-NJ) said REMS safety protocols are not meant to delay generic competition and asked about pushback to the CREATES Act. Mr. Carrier said he does not believe it will incentivize lawsuits and noted that the issue with settlements involve patents and 180-day exclusivity periods, but that is not the case here and instead they would have to settle with every generic that entered the market. Mr. Davis noted his support for the bill and said the FDA should be kept at the center. He added that there is currently no enforcement mechanism for REMS abuses but there should be a triggered action if they fail to negotiate.
Rep. Fred Upton (R-MI) asked about unintended consequences from the bills that may hamper innovation. Mr. Kushan said they are seeing a lot of innovation in the biologics space including cross-licensing of technology, adding that he would not want to limit that dynamic by retroactively reversing agreements already settled on, for example. When asked which version of CREATES he supports, Mr. Davis said he is willing to work with anyone in a meaningful way towards sufficient enforcement.
Rep. Kurt Schrader (D-OR) said he is encouraged by increased approval of generics, noting that getting approved isn't the same as getting them into the pipeline. He noted generics that are approved as first filers stop the process before getting approval, blocking subsequent filers for an average of 12 months, much longer than the 180-day exclusivity. He said the BLOCKING Act would stop this practice of "parking" exclusivity, which the FDA said has the potential to save $1.8 billion. Mr. Carrier said there is little incentive for subsequent generics to bring challenges if they don't get part of the exclusivity, so that is a necessary component.
Rep. Morgan Griffith (R-VA) asked if H.R. 1499 and H.R. 1506 make it easier or harder for generics to come to market. Mr. Karst said it could make it more difficult by providing incentives to engage in longer litigation. He added that H.R. 1499 doesn't reflect reality and said settlements can be mutually beneficial and may lead products to get to market faster. When asked about pay-for-delay deals, Mr. Davis said the vast majority of agreements have been found not to be anti-competitive, adding that they should be taking on issues of "evergreening" and patent stacking.
Rep. Doris Matsui (D-CA) asked how consumer are impacted by some of this behavior and if payors like Kaiser worry about access to generics. Mr. Barrueta said ready availability of generics keeps costs stable over time and the lack of generics leads plans to modify their benefits. He said as we move toward more expensive drugs we need to address these abuses up front and that legislation like CREATES is very clear for them. He added that other obvious targets include looking at changing the incentives in Part B reimbursement and looking at the Medicaid rebate program, which deters discounting, along with broader FTC authority.
Rep. Brett Guthrie (R-KY) asked for clarification on pay-for-delay deals, of which 5 out of 170 were ruled to be noncompetitive before the FTC last year. Mr. Karst said they can actually be pro-competitive by allowing for earlier settlements that may get products to market faster. Rep. Guthrie said CREATES may incentivize frivolous lawsuits instead of merely looking to gain access to samples. Mr. Kushan agreed it may incentivize some of this activity and said they should ensure samples are being requested and made available for the right reason. Regarding insulin, Mr. Davis said there is a convergence of issues including with rebates, late-stage patenting, and pending biosimilar issues with the FDA.
Rep. Tony Cardenas (D-CA) discussed biosimilar entry, saying that 50 exist in Europe as opposed to 7 in the US. Mr. Barrueta said they are using biosimilars extensively, with 75% use, adding that they need to provide objective information to physicians to remove any biases, perhaps using government funding. Regarding other loopholes, Mr. Barrueta said this legislation is a good start, but further examination is needed regarding the broader patent thicket problem.
Rep. Greg Walden (R-OR) asked about H.R. 938, the BLOCKING Act, and asked how the bill attempts to resolve some of these issues. Mr. Boutin said they are supportive of the intent and want to ensure generics are getting to market as soon as possible. When asked about unintended consequences of the pay-for-delay bill, Mr. Davis said the number of anti-competitive agreements has dropped significantly, and there are instances in which settling generics cannot continue due to the cost of legal fees. Mr. Kushan added that patents are not all created equal, and that some later in the life of a product are very narrow and there may be ways around them, so it can't be oversimplified what is actually doing the blocking.
Rep. Peter Welch (D-VT) asked about eliminating patent abuse on the front end to not fight it on the back end. Mr. Davis said while they recognize the importance of patent protections, the concern is patents tacked on at the end to artificially extend their life. Mr. Carrier said branded companies have gotten all they want but there must be something for the generics, so the 180-day issue is an important one. When asked if he supports CREATES or the FAST Generics Act, Mr. Barrueta said whichever can be done more quickly. Mr. Karst added that the BLOCKING Act makes a complex law already more complex, which is not good or necessary.
Rep. Gus Bilirakis (R-FL) asked what is currently working and how to double down. Mr. Davis said transparency bills are a positive step, adding that benefit design and formulary placement are also important, along with ensuring out-of-pocket costs for consumers are lower. Rep. Bilirakis asked about the value of 180-day exclusivity and concerns about the BLOCKING Act. Mr. Karst said the bill isn't necessary because the FDA already has the authority to address the problem.
Rep. Ben Ray Lujan (D-NM) asked about the testing needed before generics come to market through the use of REMS samples. Ms. Kennedy said they are equipped with all the innovation and knowledge to create products that are just as high-quality as branded versions, adding that they must go through all the same tests for safety and quality, and more. Mr. Davis said the legislation maintains the safety requirements will add more teeth to it as well, not exposing the system to increased risk.
Rep. Larry Buschon (R-IN) asked which version of the bill is supported by Mr. Davis, to which he said they liked the version passed out of the Senate Judiciary committee last fall. When asked if the current version perversely incentivizes legislation and allows generics to reject reasonable offers, Mr. Davis said it is an issue of how to determine fair market value. Mr. Carrier said that litigation may wake up the branded companies to the issue.
Rep. Ann Kuster (D-NH) asked about safety measures to ensure generics come to market with the same level of safety as branded drugs under REMS. Mr. Davis said the FDA must look at and certify that they are the same as the originator drugs. Ms. Kennedy said there have been missed opportunities for generics to get into the market and that they must be lean and mean to survive, often the 5th or 6th entrant in the market, which can result in huge savings for the system. Rep. Kuster said REMS abuse should be a top priority.
Rep. Richard Hudson (R-NC) said there should be robust protections of innovation, noting his concern with a Democratic proposal around competitive licensing of drugs. He asked Rep. Eshoo if she would commit to getting technical assistance from the FDA on the bills and she said she would. When asked about how to improve Purple Book legislation, Mr. Karst said having a list of patents in the Purple Book, similar to the Orange Book, could be helpful for knowing what biosimilars are out there.
Rep. Nanette Diaz Barragan (D-CA) asked about the issue of generics abusing the 180-day market exclusivity reward and signing agreements to be kept off the market. Mr. Carrier said brands settling with first-market generics can stop generic entry for years, adding that addressing the exclusivity issue is an easy way to address the problem and deter settlements.
Rep. Buddy Carter (R-GA) asked about the versions of CREATES supported by the panel. Mr. Davis said he does not see significant differences although Rep. Carter said he was told there were. When asked if generics may still sue if they are provided the samples, Mr. Carrier said it shouldn't be an issue if they are getting the samples. Mr. Davis added that they are not getting the samples they need. Rep. Carter ended by saying he is introducing legislation that would allow MEDPAC and MACPAC to get pricing data from Medicare and Medicaid to help Congress make better legislation on the topic.
Rep. Lisa Blunt Rochester (D-DE) said $265 billion was saved due to generic entry in 2017, adding that access to samples is vital to development, flagging the CREATES and FAST Generics Act. Mr. Barrueta agreed they are very important bills and said CREATES would have the largest impact on pricing of the legislation under consideration. When asked about the patent system, Mr. Barrueta said they want to ensure a balance is struck between maximizing innovation and promoting access. Mr. Boutin said he supports CREATES and is sick of seeing companies use patients as a shield, as he sees no patient safety concerns with the legislation.
Rep. Greg Gianforte (R-MT) noted he will release a bill on drug price transparency and asked about the use of CREATES to recapture profit. Mr. Krast said he cannot think of another law that allows for this, and Rep. Gianforte expressed concern that the large pot of money would create an incentive for lawsuit. When asked about the retroactive nature of pay-for-delay legislation, Mr. Kushan said it could result in significant obstruction and they need to look at patent scenarios individually and not make blanket assumptions.
Rep. Bobby Rush (D-IL) said there was a $3.5 billion cost to consumers due to lack of generic competition, to which Mr. Carrier said the number was calculated by the FTC. When asked about lowering costs and increasing competition, Mr. Boutin said competition is the key to lowering costs and they need to root out the issues and adjudicate them instead of engaging in lengthy legal battles.
Rep. John Shimkus (R-IL) said there is broad support for CREATES and FAST Generics Act and asked about complaints. Mr. Davis said there were at least 175 complaints and Mr. Boutin added that there are also issues when looking to gain access to samples for comparative tests. When asked which approach was preferable, Mr. Davis said they just want the issue fixed. Regarding properly safeguarding dangerous products, Mr. Barrueta said they have a specialty pharmacy with capacity for REMs, but sometimes they are impaired in getting to market due to the issues discussed.
Rep. Robin Kelly (D-IL) asked about the Orange Book Transparency Act, which Mr. Carrier said would benefit the market by making clear when a patent is invalid and no longer blocking drugs from entry, adding that, while the FDA collects information, it is not a ministerial role. Mr. Kushan added that the problem with this is decisions may get reversed and it would lead to a disruption in the market, so they shouldn't include it unless it is the final outcome. Mr. Karst added that the FDA will not take it out of the book if it has 180 days' exclusivity.
Rep. Raul Ruiz (D-CA) said he is pleased with the number of policies to encourage generic competition, which is vital in saving taxpayer dollars and reducing patient out-of-pocket costs. Mr. Boutin said it would help the 160 million Americans living with one or more chronic conditions who many rely on generics to dramatically drive down their costs. He added that a huge number of underinsured pays $60 to several hundred dollars for medications instead of, in some cases, $5 for the generic, and noted the need for system-wide transparency, including relationships with providers and pharmacists.
Rep. John Sarbanes (D-MD) noted the $3.5 billion in increased drug costs over 10 years and said the FTC takes it case by case, which takes a lot of time. Mr. Carrier said that brands and generics continue to settle because it is mutually beneficial, but that the Supreme Court found these deals to be anticompetitive, adding that they should make clear they are illegal. Rep. Sarbanes said they should draw a bright-line standard with the presumption that pay-for-delay deals are anticompetitive and illegal, noting strong support for Rep. Rush's bill.
Rep. Jan Schakowsky (D-IL) discussed her bill, the Fair Drug Pricing Act, which requires pharma to submit justification for certain drug price increases to HHS, giving taxpayers advanced notice of price increases. Mr. Barrueta said this type of legislation absolutely helps to lower drugs prices and that they are doing it on a state level, but a national law would ideal. Rep. Schakowsky also discussed the practice of "evergreening," extending the life of a patent through small changes like a changed delivery system, adding that it results in $1 billion a year in extra costs for Medicare. Mr. Carrier said they could give the FTC the power to investigate that phenomena as potentially anticompetitive, and Rep. Schakowsky added that her subcommittee deals with FTC issues.
Rep. Darren Soto (D-FL) asked about generics for diabetes medicine. Ms. Kennedy said that more competition gets us to where we need to be, and Mr. Davis said insulin is a perfect example of why these issues are so vital. Mr. Karst said they must preserve the 180-day exclusivity as they work on legislation and Mr. Kushan said we also need to look at solutions for tomorrow's problem, including curative solutions. Mr. Carrier added that there needs to be a focus on PBMs and formularies in addition to dealing with patent issues, adding that the Orange Book Transparency Act would help with this.
Hearing on Reducing Barriers to Market Competition for Prescription Drugs