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GPhA: Recommendations in PhRMA-Funded Report Would Gut Hatch-Waxman Act

Measures Would Cost Consumers as Much as One Trillion Dollars

WASHINGTON, D.C. (NOV. 7, 2011) - The Generic Pharmaceutical Association (GPhA) today released the following statement in response to a PhRMA-funded report to be published this week in the November issue of the journal Health Affairs, which calls for a 7-year increase in the exclusivity period for brand drugs and the removal of the initial 180-day marketing exclusivity period currently in place for first-to-market generics.

"If the reckless recommendations in this report are followed regarding extending the exclusivity period for prescription drugs, the historic Hatch-Waxman Act would be gutted, costing American consumers and the U.S. health care system as much as a trillion dollars over the next decade," said Ralph G. Neas, President and CEO of GPhA. "Indeed, to follow the path suggested in this study would put at risk not only the sustainability of the American health care system, but also the national economy."

"It must be recognized that this study comes from the same sources who told Congress that 12 years of exclusivity for biologics was needed to incentivize the innovation of new biotech medicines," Neas added. "But as the Federal Trade Commission (FTC) concluded in its 2009 report "Follow-On Biologic Drug Competition", market competition from biosimilars and biogenerics actually will spur biologic innovation and the introduction of new medicines."

Hatch-Waxman has ushered in more than a quarter-century of ever-increasing research and development (R&D) spending, the introduction of scores of advanced and more effective new drugs, and hundreds of billions of dollars in savings from safe and effective generic drugs. Spending by U.S. brand pharmaceutical companies on R&D has grown steadily since the 1984 enactment of Hatch-Waxman. An Office of Technology Assessment study-Pharmaceutical R&D: Cost, Risk and Rewards-found that R&D spending increased by just $2 billion dollars in the seven years prior to Hatch-Waxman but increased by $4 billion - or double that rate of growth - in the five years following Hatch-Waxman implementation.

Further, an IMS Health analysis released in September 2011 showed that the savings achieved by newer generics launched over just the past 10 years totaled $362 billion. Much of this savings - which has occurred while the profits of brand pharmaceutical manufacturers have continued to rise between 15 and 20 percent annually, and spending by the industry on direct-to-consumer and other advertising has vastly outpaced amounts invested in R&D - would have been lost had these generic drugs been delayed from coming to market because of a 12-year exclusivity period.

Equally, the 180-day generic exclusivity period established by Hatch-Waxman has proven to provide an effective incentive for manufacturers to develop generic medicines once brand exclusivities expire. Removing the generic incentive would take the U.S. back to the pre-Hatch-Waxman days when few generics were available.

"By any measure, the Hatch-Waxman Act has been a resounding success in achieving its stated goal of generating savings while preserving incentives to innovation," Neas said. "Rather than taking the treacherous steps of revisiting a successful policy that has served the country so well, we should be focusing on mirroring these remarkable accomplishments in the regulation of biogenerics and encouraging policies that will provide patients with increased access to safe and effective generic medicines."

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals, and suppliers of other goods and services to the generic industry. Generic pharmaceuticals fill 78 percent of the prescriptions dispensed in the U.S. but consume just 25 percent of the total drug spending. Additional information is available at gphaonline.org.

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