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The Hatch-Waxman Act and pharmaceutical costs

How is it that we have a “prescription drug price crisis when 90% of prescriptions are filled with generic drugs that cost, on average, $1 a day? The answer: The remaining 10% of prescriptions have an average cost of $20 a day and account for 80% of all prescription drug spending.” The intent of the Hatch-Waxman Act was to make low-cost generic drugs widely available, but part of the negotiation was to allow for longer patents on new drugs.

What was meant to help consumers save on the cost of pharmaceutical drugs has only made it unreasonably expensive for some of the most commonly prescribed drugs. Before the Hatch-Waxman Act, the FDA required an independent review of a generic drug to confirm if it was safe and effective. This process was so expensive that few generic drugs were approved.  Soon, the Federal Trade Commission recommended that all states adopt a law that mandated generic drug substitutions and to combat this, brand-name drug manufacturers asked for longer monopolies on these drugs before a generic version could be manufactured.

So what does this mean for consumers? On a positive note, initially, consumers benefited from this Act. It increased the use of generic versions of older medicines and saved consumers money.  On the downside, new drugs that were potentially more effective than their older drug counterpart were given a 12-year monopoly, which was an increase from 10 years back in 1984. This required consumers to pay more and wait longer for those brand-named drugs to reach their monopoly end date and have a generic substitution available. The findings show that longer monopolies only increase pharmaceutical costs for the consumer and impede innovation. The hope is that modifications to this Act can be made but it won’t be without legislation getting involved to limit the price of drugs and limit yearly price increases due to inflation.

In a subsequent blog, we will talk about skinny labels and how these may prevent brand-name drug manufacturers from delaying competition. As a partner in the pharmaceutical labeling space, Pragmatyxs has experience with the strict regulations surrounding labeling for brand-name and generic drugs.