In recent years there have been a few high profile situations in which the price of a medicine has jumped sharply and suddenly, after decades of availability at a much lower price. In some of these cases — like the case of gout treatment colchicine, which went from 10 cents to five dollars per pill in 2011 — the sudden price increase relates to FDA’s “unapproved drugs initiative.” This refers to the agency’s approach to removing unapproved new drugs from the U.S. marketplace.
This blog entry explains the back story and the public policy conundrum that merits some attention.
Origins of the Unapproved Drugs Situation
FDA estimates there are several thousand drug products marketed in the United States without a required approval. (See here.) This corresponds to as few as three dozen (or as many as several hundred) active ingredients. Many of these have been marketed safely for decades or longer, and some are covered by health insurance. Others have proven to be unsafe, leading to removal from the marketplace, sometimes only serious injuries and deaths.
The presence of unapproved new drugs in the marketplace stems from the piecemeal evolution of the drug approval scheme over the course of the 20th century.
Beginning in 1938 federal law required an effective new drug application (NDA) before a company launched a “new drug.” The phrase “new drug” is a term of art; it doesn’t mean a new medicine in the ordinary conversational sense. The alternative is a drug that is not a new drug (which doesn’t require an NDA). Under the 1938 law, a company could launch a drug without an NDA if the drug: (a) had been marketed under the Food and Drugs Act of 1906 and no changes were made, or (b) was generally recognized as safe. Also some companies marketed drugs that were “identical, related, or similar” to drugs with NDAs. These were basically generics, and FDA permitted them without their own applications.
The 1938 statute did not require companies to demonstrate the effectiveness of their new drugs. In 1962 Congress amended the statute to add an effectiveness requirement. Under the new scheme, a company still needed an NDA to launch a new drug, but this NDA had to be preapproved and had to show effectiveness. Under the 1962 law, a company could launch a drug without an NDA if the drug: (1) had been lawfully marketed without an NDA before 1962 — basically categories (a) and (b) from the earlier scheme — and no changes had been made, or (2) was generally recognized as safe and effective.
After 1962 FDA reviewed all of the NDAs that had taken effect under the 1938 scheme. This process was called the Drug Efficacy Study Implementation (DESI) program. If FDA found a drug effective, each company marketing the drug under an NDA was required to file a supplemental NDA. Anyone marketing a copy was required to submit an application, too: an abbreviated new drug application (ANDA). If the agency found the drug ineffective, though, neither the drug nor the copies could be marketed (although FDA had to remove them individually).
As it turns out, the DESI process is not entirely finished. Some drugs are still under review without a final decision. Longstanding FDA policy permits a drug to remain on the market until the proceeding finishes.
Which drugs are unapproved today, and are they legal or not?
As it turns out, there are lots of unapproved drugs on the market.
First, most over-the-counter drugs are unapproved. This is perfectly legal; they fall within the “generally recognized as safe and effective” exception. Most of the OTC drugs that you find in the drug store are marketed without new drug applications. Instead they comply with ingredient-specific regulations called “monographs,” described here.
Second, there may be unapproved prescription drugs lawfully on the market, even today. These would be: (1) drugs that were marketed lawfully without an NDA prior to 1962 and that have not changed, (2) prescription drugs that are generally recognized as safe and effective, and (3) any drugs with ongoing DESI review proceedings. FDA’s view is that there probably aren’t any drugs legitimately in the first two categories.
Third, most unapproved prescription drugs are unlawfully on the market. They fall into three categories: (1) drugs for which an NDA or ANDA was required after the DESI process, but no application was ever filed; (2) drugs found ineffective in the DESI process but not removed from the market; and (3) drugs that are wrongly claimed to be grandfathered or GRASE.** Most of these drugs have been used for a very long time and are cheap. Most are probably safe and effective. Some of them, however, are probably not safe. And others are safe but not particularly effective, which also presents a health risk, because they may keep patients from drugs that do work.
(** Of course, there are also compounds that have never been marketed before and that are slipped into the market without FDA approval.)
What can FDA do?
FDA does not have the resources to take enforcement action against every unapproved drug that is marketed illegally. Here’s what it does.
- First, it will take immediate enforcement action with respect to a medicine that is entirely new to the market and shipped without an approved application.
- Second, with respect to older medicines that are marketed without required approval, it takes a risk-based approach. It prioritizes drugs that present public health concerns. You can read through the priorities here.
- Third, it wants to encourage companies to complete the research necessary for approval of an NDA. And it believes that once a single company has obtained approval of a particular older medicine, the other companies that market unapproved versions “present a direct challenge to the drug approval system.” So it takes enforcement action against the remaining companies, after providing them a grace period to come into compliance.
Why do prices go up?
Even if an older medicine has been marketed for decades, to satisfy the modern drug approval standard the company will need to generate new data. Approval of an NDA requires safety and efficacy data that show the drug is safe for use under the conditions described in the labeling and that provide “substantial evidence” of its effectiveness under those conditions. This generally requires data from two “adequate and well-controlled” clinical trials demonstrating effectiveness of the drug when used as described in the labeling, though sometimes it is possible to use one trial. Although the company won’t have to do all of the research that a drug company performs now to bring a new active moiety all the way from the laboratory to patients, there is no way to avoid the fact that performing this research will cost a significant amount of money.
Once a single company obtains approval of a previously unapproved older drug and FDA removes the other products from the market, the marketplace changes fundamentally. For a time, there will be only one version of the drug on the market, and the company that performed the research will be looking for a way to recover its investment. Typically, generic applications will be approvable at the end of three years, but for that three years the prices of a well-known and long-used drug may increase substantially. The three year waiting period is statutory and not discretionary; if an NDA contains clinical data that were essential to its approval, the agency may not approve a generic copy for three years.
How do we solve this problem?
The sudden price increase is troubling from a public policy perspective. So is the presence of unapproved drugs that may not be safe and effective. And research costs money. Hence the conundrum.
Some might argue we should just exempt these drugs from the NDA requirement. But a mass amnesty program might be unfair to the companies that have already invested in bringing older medicines into compliance. It also would not solve the public health challenge: some of these older drugs are actually unsafe and ineffective.
So how do we ensure these older medicines are brought into the NDA framework — meaning tested and then either placed under NDAs or removed from the market?
No reasonable firm with a medicine that has been marketed for decades will invest hundreds of millions of dollars to support an NDA unless either forced to do so or incentivized to do so. But FDA cannot force these companies to do this research without threatening enforcement action, and threats are effectively only if backed up by actual enforcement actions. This would require resources that FDA doesn’t have. And it would involve taking safe, effective, and cheap medicines away from patients.
This is why FDA offers an incentive. Arguably the incentive is fairly modest. First, FDA removes competing products from the market. This provides an incentive, but it has two other benefits; it ensures that patients take the precise product (formulation, dosing, labeling) that has been found safe and effective, and it preserves the integrity of the approval system. Second, the statute provides three years of exclusivity. This provides an incentive, but it is far shorter than exclusivity for new chemical entities (five years) and biologics (12 years) and far shorter than a patent. (If the drug is for a rare disease, though, the company may receive seven years instead.) Depending on the prices that can be charged in the marketplace during the three years in question, the company may be able to recover its investment and some profit. This may provide the incentive to do the work.
But: this incentive presents the same problem as enforcement action. The higher price, combined with removal of the other products, means that once again the system is taking safe, effective, and cheap medicines away from patients.
The question is whether there is a better way. Every year my Drug & Device Law students explore this in a written assignment, finding solutions that have been proposed in the past, and proposing their own. I am not sure what the answer is, but I think this deserves some attention and reflection, from the agency, the healthcare professional community, patients, payers, regulatory experts, bioethicists, and all other interested stakeholders.