Deregulating The FDA to Cut Drug Prices

During a recent meeting with CEOs from some of the nation’s largest pharmaceutical companies, President Trump said, “We’re going to be cutting regulations at a level that nobody’s ever seen before,” estimating that 75% to 80% of all FDA regulations need to be eliminated.

These comments, shared at the end of January, revealed Trump’s vision for getting new medications on the market faster by streamlining the drug approval process. While the intended outcome is to increase competition among drugmakers and drive drug prices down, Trump’s comments have drawn a variety of reactions from those working in the health care industry.

Mixed Views

“I think in general when you talk to people in the drug industry the idea that the FDA is a big part of the problem is not widely shared,” Katherine Hempstead, PhD, a senior advisor at the Robert Wood Johnson Foundation, told First Report Managed Care. “I think the FDA actually has, in my opinion, a good mix of efficiency and safety and has a good record.”

Some pharmaceutical executives have expressed concern that a less robust FDA could make it more difficult to obtain insurance coverage for expensive new medicines, according to a recent Reuters report. While many sectors welcome less oversight, drugmakers realize that a thorough review process is essential for convincing physicians and insurers that a medication is clinically valuable.

However, others see the good behind Trump’s proposal. Joel White, president of the Council for Affordable Health Coverage and a former staffer with the House Ways and Means Committee, told First Report Managed Care that cutting regulation and getting products on the market faster will save money and expand access to therapies that were not available before. 

“This flooding the zone type of activity will create additional price points or leverage points for insurers and PBMs and other payers to negotiate discounts,” Mr White said, “and those discounts will be passed on to consumers with insurance. And the competition for the people who are uninsured will translate into lower retail prices.”

Mr White added that the strategy of reducing the regulatory burden could be an effective means to reducing costs, due to the proven success of adding pharmaceutical competition to the market.

“The reason I say that with such certainty is because we’ve seen it over and over and over again in the marketplace,” he added, pointing to Sovaldi (sofosbuvir; Gilead) as one example. When the hepatitis C drug came on the market in 2014, the $1000 a day pill drove a lot of the dialog around drug pricing. It was a tough time, he admitted, but over an 18-month period, three additional products came on the market, which led to discounts ranging from 20% to 60%.

“So that competition really does translate into lower prices or costs, and the way to get more competition is to flood the zone with more products. And the way to do that is to get more product approvals through the FDA,” he added. “The policies that Trump has talked about, while nonspecific, go at the right goal—to get more products on the market and to create more price negotiation to translate into consumer welfare.”

Continued on next page

Balancing Competing Interests

According to Michael Carome, MD, director of the health research division of consumer watchdog group Public Citizen, consumer welfare will also be at risk if FDA regulations are slashed. Following the President’s comments, he issued a statement noting that the proposal to drastically reduce FDA regulations would destroy the FDA’s ability to protect the public and would result in preventable deaths, injuries, and illness.

Additionally, while Mr White supports Trump’s proposal, he also pointed to safety and efficacy as the most obvious concerns when there is consideration of cutting regulation and quickening the approval process. 

“If you’re speeding these things through an approval process that’s not meaningful, you’ve got to be concerned about the quality of the product because you’re actually putting that in your body,” he explained. 

Furthermore, those who are prescribing the drugs need to have confidence that pill does what the manufacturer says it does, and the FDA is the guardian that ensures that sense of security and trust. 

“The challenge that we have, therefore, is balancing these competing interests between more product approvals that translate into lower costs and an agency that’s designed to ensure safety and efficacy,” Mr White added. 

It is a difficult balancing act, and while Mr White believes that those who work for the FDA are well intentioned, he wonders if that balance has veered too far in the direction of caution. “That’s translated, unfortunately, into a backlog of about 4300 generic applications at the agency,” he said, which means there are generics that could benefit consumers that are not coming to market.

It is a backlog that may very well relate to staffing issues, however. Dr Hempstead noted that while process improvements have been made within the agency and timelines for approving generics have been sped up in recent years, she recalled listening to the outgoing head of the FDA give a talk shortly before the election.  “I remember being really struck by how profound he felt the shortage was in personnel at the FDA,” she said.

Continued on next page

Anticipated Changes

There have been two types of market failure in recent years, Mr White explained. One involves old products that lack competition, which can result in huge price spikes. A well-known example of this occurred in 2015 when Turing
Pharmaceuticals raised the price of Daraprim, a drug used to treat HIV patients, from $13.50 to $750 overnight.

Last fall, another scenario attracted plenty of attention when Mylan raised the cost of the EpiPen, the epinephrine injection device, by over 400%. Even more recently, as communities across the country have faced lead-tainted water crises, Valeant Pharmaceuticals raised the price on a lead poisoning treatment by 2700% in light of the product’s demand.

The other kinds of market failures occur when competing products have prices that increase roughly in step with one another with very little discounting taking place. It is a phenomenon that has drawn recent accusations of price-fixing throughout the pharmaceutical industry. These potential anticompetitive practices should be investigated by the Federal Trade Commission, Mr White said, but getting more drugs on the market faster would likely help address the first market failure described.

Although changing the culture at the FDA or creating tighter deadlines, for example, could help to an extent, he said the most significant changes would likely be brought about by Congress. Mr White anticipates that a bipartisan bill from Congressmen Kurt Schrader (D-Oregon) and Gus Bilirakis (R-Florida) will likely become law this year. The Lower Drug Costs Through Competition Act is meant to provide incentives for drug manufacturers willing to develop generics when competition does not exist or when there is a drug shortage by awarding Priority Review Vouchers. 

He also pointed to a couple of user fee bills that will go through Congress this year—referred to as “must pass” because they fund much of the FDA’s operations and will need to be completed by September 30 of this year.  

“We’re fairly confident that one way or another this market is going to change this year,” he added. “Probably both as a result of regulatory changes on the administration’s part but also because Congress is stepping up and taking action.”

Looking forward, it appears President Trump is doubling down on his pledge to cut FDA regulations in order to spur competition. During his joint address to Congress, he said that the current approval process is “slow and burdensome,” and hinders clinical breakthroughs from “reaching those in need.”

“If we slash the restraints, not just at the FDA but across our Government, then we will be blessed with far more miracles,” President Trump said during his address. These remarks were well received by Republican lawmakers, suggesting action will be taken soon.