House Subcommittee Shows How Drug Companies Game The System to Keep Prices High

Yesterday the House Subcommittee on Consumer Protection and Commerce held a hearing on how drug companies use gimmicks and loopholes to increase prices and stifle competition. This hearing focused on product hopping, where brand drug companies make small changes to their medicines for the purpose of delaying competition.

In a two hour hearing, experts testified on this problem and offered some possible solutions. Product hopping can take many forms, such as changing a drug from a capsule to a tablet, a change in dosing or strength, or combining two or more previously approved drugs to create a new medicine. If the changes are timed correctly, a drug company can use them to prevent more affordable generic drugs from being substituted at pharmacies for these redesigned brand drugs. Often the drug company will withdraw its old version so consumers have to switch to the new, more expensive version.

The witnesses were Professor Michael Carrier of Rutgers University, General Counsel Jeff Francer for the Association of Accessible Medicines, David Mitchell of Patients for Affordable Drugs NOW, and Professor Joanna Shepherd of Emory University School of Law.

Rep. Jan Schakowsky (D-IL) chaired the hearing. She noted that “you will hear many terms to describe the problem, but the bottom line is this: Drug manufacturers are gaming the system to make more money at consumer expense. And that has to stop.” She added that “experts suggest about 78% of the drugs that get new patents are not new drugs. They are new patents for existing drugs. Instead of truly innovating, drug manufacturers are talking advantage of the anticompetitive environment we have created by recycling old medicines.”

Schakowsky emphasized that the problem goes beyond several bad actors; it is systemic. Many companies are withholding new discoveries from consumers until they can use the innovation to block competition. Big Pharma actually blocks the innovation they claim to treasure. American should not have to wait years for drugs that have already been discovered.

The Republicans on the committee attempted to denigrate the hearing, claiming that it was motivated by partisan politics and that the minority legislators were being shut out. Rep. Greg Walden (R-OR) worried that proposed bills would reduce innovation.

Professor Michael Carrier spoke first and emphasize that drug companies play games to increase profits. If we deal with product hopping, he said, it will not harm innovation at all. When a generic drug enters the market the price can fall 90% overnight. There is a lot of room for anticompetitive behavior. Not all changes to drugs are anticompetitive but the proposed bills would only address the bad changes just intended to suppress competition. “Every time the brand company switches,” Carrier said, “the generic has to go back to the drawing board…It’s [a generic drug] kept off the market for years and this has significant effects.”

Carrier praised a bill that the Judiciary Committee passed to address product hopping. He urged the Committee to make consumers’ lives better and pass reforms.

David Mitchell of Patients for Affordable Drugs then testified with his usual eloquence. He spoke about patients who told him that companies had made tiny changes to drugs in order to thwart generic versions and keep prices unaffordable. Mitchell also pointed out that from 2010 to 2016 every single drug approved by the FDA was based on science and research funded by the National Institutes of Health. Drug companies should make a profit when they create innovation, but this is not innovation. Mitchell told the Committee members to end product hopping and enact even bigger changes such as Medicare negotiations. Changing a prescription drug from a tablet to a pill is not substantive innovation, and it should not enable a company to prolong its monopoly.

Joanne Shepherd testified next. She said that many replacements of older drugs with new drugs are helpful but that certain changes-product hopping-are anticompetitive. A hard switch that eliminates consumer choice with no corresponding benefit is likely an anticompetitive product hop. And a soft switch that significantly interferes with consumer choice is likely anticompetitive as well. Consumers are coerced into switching to the new product because there are no alternatives.

Finally, Jeff Francer spoke. He thanked the Committee for their efforts to bring down drug prices. Generic competition is a proven solution for lowering costs but the continuing availability of generic medicines is in jeopardy. Brand drug companies are increasingly building patent thickets around their drugs-Lantus has many patents around it to ward off competition. Francer denounced product hopping and hard switches, which are intended to extend brand company monopolies on drugs and delay competition. He pointed out that some drug companies have used these tactics to delay access to Suboxone, a treatment for opioid addition. And they did this at a time when the opioid epidemic is ravaging our communities! Francer urged the Committee to ensure that generics and biosimilars are readily available to consumers.

The witnesses thoughtfully looked at product hopping and offered several excellent solutions. Now the ball is in in the House’s court, and we are waiting.