Price and Quality in the Generic Pharmaceutical Market

HomeCirculationVol. 145, No. 16Price and Quality in the Generic Pharmaceutical Market Free AccessArticle CommentaryPDF/EPUBAboutView PDFView EPUBSections ToolsAdd to favoritesDownload citationsTrack citationsPermissions ShareShare onFacebookTwitterLinked InMendeleyReddit Jump toFree AccessArticle CommentaryPDF/EPUBPrice and Quality in the Generic Pharmaceutical Market Ben Teasdale, David Light and Kevin A. Schulman Ben TeasdaleBen Teasdale https://orcid.org/0000-0001-9904-3518 Clinical Excellence Research Center, School of Medicine (B.T., K.A.S.), Stanford University, Palo Alto, CA. , David LightDavid Light Valisure, LLC, New Haven, CT (D.L.). and Kevin A. SchulmanKevin A. Schulman Correspondence to: Kevin A. Schulman, MD, Clinical Excellence Research Center, Center for Academic Medicine, 453 Quarry Rd., #117B, Palo Alto, CA 94304. Email E-mail Address: [email protected] https://orcid.org/0000-0002-8926-5085 Clinical Excellence Research Center, School of Medicine (B.T., K.A.S.), Stanford University, Palo Alto, CA. Graduate School of Business (K.A.S.), Stanford University, Palo Alto, CA. Originally published18 Apr 2022https://doi.org/10.1161/CIRCULATIONAHA.121.057727Circulation. 2022;145:1185–1187Branded medications dominated the prescription market in the 1980s, constituting 81% of fills in the United States. A majority lacked generic equivalents even after patent expiry. In 1984, the Hatch−Waxman Act eased the regulatory burdens of generic approval, radically changing the prescription landscape. Today, generic prescriptions account for 90% of new prescriptions and have saved patients an estimated $1.5 trillion.1Although a significant economic advantage for consumers, generic medications are only a benefit to the extent that they provide the same quality product for patients as their branded counterparts. Currently, the market relies on Food and Drug Administration (FDA) review and inspections of manufacturers' quality management processes to assure drug quality. This approach has become increasingly strained during this period of rapid expansion of the generic market.Concern about the quality of generics is a well-documented issue for cardiology. The sale of adulterated heparin in 2008 resulted in 149 deaths and many more severe adverse reactions, leading to large-scale recalls by Baxter. In 2010, the FDA determined that the majority of the 4 million nitroglycerin prescriptions dispensed the year before had not been approved for sale in the United States.Recently, generic angiotensin II receptor blockers (ARBs) were found to contain carcinogenic N-nitrosamine impurities, which, beginning in 2018, led to a series of recalls of manufacturing lots of valsartan, losartan, and irbesartan. Unfortunately, concerns about manufacturing quality persist worldwide given the globalization of the supply chain. Health Canada led a new round of recalls in 2021 over elevated levels of mutagenic azido impurities in ARBs, and there were similar recalls in the United Kingdom and Europe.The FDA estimated that 8000 people would have to be consistently exposed to the highest dose of contaminated valsartan for 4 years before any 1 person developed new cancer. The European Medicines Agency, taking a more conservative approach, estimated the ratio to be closer to 1 in 3000.2 Since 2018, the FDA has reported recall of at least 12 million bottles of ARBs. Assuming each of these bottles was contaminated, this supply could have caused 31 to 83 cancers.The cases of heparin, nitroglycerin, and ARBs represent the most publicized cases of quality control issues in the generic drug market. Fortunately, there is no indication that these events signal widespread concerns of substandard quality. Carcinogenic risk appears low relative to the known mortality benefits of these medications; however, these quality issues are preventable, and the truth is that we do not know how representative they are.The generic medication market evolved to deliver low-cost products as its major focus. Despite the maturity of organizations within the supply chain, the issue of quality in the United States has been sidelined, delegated to the FDA alone, who focus their oversight on manufacturers. Beyond the manufacturer level, the distributors, wholesalers, retailers, and pharmacy benefit managers who profit off the sale of pharmaceuticals lack any corresponding accountability for the quality of the products they sell.Manufacturers of generic drugs must demonstrate to the FDA that their products are bioequivalent to the brand medication, that they meet certain labeling requirements, and that the manufacturers have certain manufacturing capabilities and quality processes. Once multiple generic manufacturers gain FDA approval, variation in medication quality becomes invisible to purchasers throughout the supply chain, and manufacturers compete to gain market share solely by offering lower prices. Manufacturers thus respond to a market where price, not quality, is the only observable characteristic of a product. The FDA has shared this perspective, testifying in 2019 on the maturity of quality management systems, "The market currently has no visibility into manufacturing facilities' quality."3One of the factors straining the ability of the FDA to keep up with quality oversight of generic products has been the rapid globalization of the supply chain during the last 2 decades. By 2020, 74% of establishments manufacturing active ingredients were located oversees.4 The FDA, a US government agency, must now oversee a global market where it does not have direct jurisdiction. This results in bureaucratic barriers to performing effective site visits. For example, inspection of foreign facilities requires visa applications and prior announcements of inspection dates, allowing these facilities to better prepare for inspections. The FDA relies on self-reported quality data from manufacturers, even in environments where veracity of data has been questioned. Further, the FDA does not perform routine testing at the product level. Although the FDA does investigate products when it has suspicion, there is currently no systematic exploration of product quality that would raise this suspicion.The role of the FDA has been further complicated by the COVID-19 pandemic. Since March 2020, the FDA has been forced to limit itself to only "mission-critical" inspections of foreign manufacturers, with 3 inspections reported in the last 9 months of 2020.4 The FDA now faces a backlog of surveillance inspections, and it was projected that 43% of foreign facilities would not have been inspected in 5 years by the end of 2021.In essence, we have a market focused on price, with quality assurance relegated to the FDA's review of an initial application, manufacturer-provided data, and increasingly difficult site inspections, all in the absence of systematic quality surveillance by the purchasers of medication.An open question is whether the presence of quality issues is an inherent tradeoff in a market that provides access to low-cost medications. To test this question, we examined the impact of product recalls on price and volume for ARBs (which were impacted by recalls) and angiotensin-converting enzyme (ACE) inhibitors (which were not impacted by recalls) for the period between the first quarter of 2018 through the first quarter of 2021 using prescription data from the Medicaid State Medication Utilization Database.5 Overall, we found that recalls did not impact unit price or access for ARBs compared with ACE inhibitors, with prices increasing more for ACE inhibitors than ARBs during this period (13% and 7%, respectively). Meanwhile, the rate of use of ARBs increased relative to ACE inhibitors, with fills for ARBs increasing 156% and fills for ACE inhibitors increasing 64%.Overall, these data suggest that we do not have to sacrifice quality for low costs, because prices did not increase disproportionately after removing poor-quality products from this market. If this is the case, why should we tolerate a generic drug market that looks solely at price and not at quality, given the quality concerns we reviewed in the cardiology market?It's easy to imagine a market where quality factors into purchasing decisions. Just because the generic market is regulated does not mean that the supply chain should defer all quality assessments to FDA inspections and data reported from manufacturers testing their own product. Quality could also be monitored and assured from periodic testing of products independently sampled at later stages of the medication supply chain. Consumers could be protected by providing a transparent medication quality score that wholesalers, distributors, retailers, and consumers could check when making purchase decisions.Ultimately, the healthcare system needs a supply chain that is accountable to quality. Our analysis suggests that higher-quality products are already available for the same price, but we lack a reliable mechanism for identifying these products. If we prescribe an ARB to help treat a patient with heart failure, it's not a clinical or economic advantage to use a $0.50 pill of poor quality when a better alternative is already available.Article InformationSources of FundingNone.Disclosures David Light is Chief Executive Officer, board member, and equity holder in Valisure, a pharmaceutical testing firm. Dr Schulman has received grants from the National Basketball Association, Inc; and personal fees from HealthQuest, Motley Rice, Frazier Healthcare Partners, ISMIE Mutual Insurance Company, and all unrelated to this article. In addition, Dr Schulman is a board member and shareholder for Grid Therapeutics; managing director and shareholder in Faculty Connection, LLC; on the board of advisors for and shareholder in Prealize; a board member and shareholder in Reserve Therapeutics (Pharmaceutical Services Company); passive investor in Altitude Ventures Inc. and Excelerate Health Ventures; senior associate editor for Health Services Research; President of the Business School Alliance for Health Management (uncompensated), an advisory board member for CivicaRx (uncompensated); and a board member for Catalysis (uncompensated), outside of the submitted work. B. Teasdale reports no conflicts.FootnotesCirculation is available at www.ahajournals.org/journal/circThe opinions expressed in this article are not necessarily those of the editors or of the American Heart Association.For Sources of Funding and Disclosures, see page 1186.Correspondence to: Kevin A. Schulman, MD, Clinical Excellence Research Center, Center for Academic Medicine, 453 Quarry Rd., #117B, Palo Alto, CA 94304. Email kevin.[email protected]eduReferences1. Thayer AM. 30 years of generics.Chemical & Engineering News. 2014; 92(39). Accessed October 21, 2021. https://cen.acs.org/articles/92/i39/30-Years-Generics.htmlGoogle Scholar2. Committee for Medicinal Products for Human Use. Assessment report: angiotensin-II-receptor antagonists (sartans) containing a tetrazole group.European Medicines Agency. Published February 14, 2019. Accessed October 11, 2021. https://www.ema.europa.eu/en/documents/variation-report/angiotensin-ii-receptor-antagonists-sartans-article-31-referral-chmp-assessment-report_en.pdfGoogle Scholar3. 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Centers for Medicare & Medicaid Services.Accessed October 3, 2021. https://www.medicaid.gov/medicaid/prescription-drugs/state-drug-utilization-data/index.htmlGoogle Scholar Previous Back to top Next FiguresReferencesRelatedDetailsCited By Dabestani A, Grossman S, Nathan J, Bazil C, Costantino R, Fox E, Graedon J, Gray J, Lever H, Light D, Makuch R, Schulman K, White C and Yu K (2022) A data-driven quality-score system for rating drug products and its implications for the health care industry, Journal of the American Pharmacists Association, 10.1016/j.japh.2022.10.001, Online publication date: 1-Oct-2022. April 19, 2022Vol 145, Issue 16 Advertisement Article InformationMetrics © 2022 American Heart Association, Inc.https://doi.org/10.1161/CIRCULATIONAHA.121.057727PMID: 35436136 Originally publishedApril 18, 2022 Keywordsgeneric drugsFood and Drug Administrationpharmaceutical economicspharmaceutical industryquality of health carePDF download Advertisement SubjectsCost-EffectivenessHealth ServicesQuality and Outcomes