Expensive Medicine: Prof. Robin Feldman's Senate Testimony on the CREATES Act

WASHINGTON, June 21, 2016 — Professor Robin C. Feldman, Director of the Institute for Innovation Law at the University of California Hastings College of the Law, testified today before the Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights at a hearing titled “The CREATES Act: Ending Regulatory Abuse, Protecting Consumers, and Ensuring Drug Price Competition.”

“Medicines are making headlines these days,” began Professor Feldman, “not for their breathtaking ability to save lives but for their soaring prices. When those high prices result from manipulation of a regulatory process, that is a problem.”

Regarding the REMS program and REMS abuse

• “An important safety program is being hijacked to block competition.”
• “More than three-quarters of prescriptions are filled with generics today, and generics are priced as much as 85% below their brand name equivalent. Given the price differential, delay can be worth billions of dollars for brand name companies. The REMS program has provided particularly fertile ground for delay tactics.”
• “This is the technique Martin Shkreli’s company planned when it hiked the price of its drug from $13.50 a tablet to $750 a tablet. Shkreli may have been particularly brash, but his company is not the only one.”

Regarding the CREATES Act

• “The CREATES Act does an admirable job of assigning the right jobs to the right branches of government.”
• “Importantly, the Act includes biologics. Biologics are complex substances like antibodies and enzymes, that differ from chemical drugs like aspirin. A third of the new drugs approved in 2015 were biologics, and it would make little sense to fix a regulatory problem, but leave out a third of the new drugs.”

Research, Findings

“I am in the process of studying 13 years of FDA data on generic applications,” concluded Professor Feldman, “and one thing is abundantly clear: the category of game-playing that includes REMS abuse has increased substantially. If Congress does not fix it, we will see more of it. And, as always, consumers pay the price.”

Professor Feldman’s full prepared remarks, below:

Testimony of Professor Robin Feldman, Director of the Institute for Innovation Law, University of California Hastings College of the Law
Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights Hearing on the “CREATES Act: Ending Regulatory Abuse, Protecting Consumers and Ensuring Drug Price Competition

June 21, 2016

Mr. Chairman and esteemed members of the Committee, I am Professor Robin Feldman of the University of California Hastings, and it is an honor to be here today. Medicines are making headlines these days, not for their breathtaking ability to save lives but for their soaring prices. When those high prices result from manipulation of a regulatory process, that is a problem. Thus, I am heartened to see the committee contemplating legislation to fix the REMS process as it relates to generic drugs.

For 30 years, the Hatch-Waxman Act has provided an expedited pathway so that as soon as drug patents expire, generic companies can enter the market and bring prices down. The Act has been enormously successful. More than three-quarters of prescriptions are filled with generics today, and generics are priced as much as 85% below their brand name equivalent. Given that price differential, holding off generic competition can be worth billions of dollars for brand name companies. The REMS program has provided fertile ground for delay tactics.

REMS are safety protocols. The program was created in 2007 after the arthritis drug Vioxx was linked to heart attacks. The goal is to ensure more particularized handling of medicines that have serious side effects or that are unusually subject to abuse. A REMS plan can range from adding warning information in package inserts to restricting who can sell and distribute the drug.

Unfortunately, some companies are using the REMS program to block generic competition. Under Hatch-Waxman, a generic company needs samples of the branded drug to demonstrate that its version is the same. Some brand companies are using the existence of a REMS plan, or declaring their own distribution restrictions, to refuse to transfer samples to generic applicants. Even when the FDA tells them to do so, they still refuse.

This is the technique Martin Shkreli’s company planned when it hiked the price of its drug from $13.50 a tablet to $750 a tablet. Shkreli may have been particularly brash, but his company is not the only one. Others have followed the same path, with one declaring in court that companies have no legal duty to give samples to generics. Thus, an important safety program is being hijacked to block competition.

The FDA has 75 REMS plans in place, and they affect millions of patients. For just one of these drugs, Suboxone, 9 million prescriptions were filled in the US in a recent year, for a total of $1.5 billion in sales. Suboxone is a classic drug that needs a REMS plan, given concerns about abuse of the drug. A safety plan, however, is to protect patients. It should not be used as a trick to block competition in the marketplace.

The CREATES Act addresses the two main forms of REMS abuse, the samples problem just described and refusing to cooperate with generic applicants on writing a REMS plan. The Act is a targeted solution that is particularly careful about patient safety. Thus, the Act authorizes the transfer of samples only if a generic satisfies the FDA’s requirements. The Act also exempts products where the FDA determines there are drug shortages, so that medicines cannot be diverted from patients who need them.

The CREATES Act does an admirable job of assigning the right roles to the right branches of government. The FDA remains responsible for evaluating safety; the courts are responsible for resolving disputes among the parties. The same assignment of roles exists throughout the Hatch-Waxman regime.

Importantly, the Act includes biologics. Biologics are complex substances like antibodies and enzymes, that differ from chemical drugs like aspirin. A third of the new drugs approved in 2015 were biologics, and it would make little sense to fix a regulatory problem, but leave out a third of the new drugs.

Fixing REMS abuse will not solve all of the problems with pharmaceutical pricing, but it is an important component. With REMS abuse, as with every time I study bad behavior in the regulatory system, I worry that publicizing it just provides a handy road map for mischief. And in fact, efforts to block generic competition are increasing in general. I am in the process of studying 13 years of FDA data on generic applications, and one thing is abundantly clear: the category of game-playing that includes REMS abuse has increased substantially. If Congress does not fix it, we will see more of it. And, as always, consumers pay the price.

About Professor Robin Feldman, Director, Institute for Innovation Law

Professor Robin Feldman received a bachelor’s degree from Stanford University and a J.D. from Stanford Law School, graduating the Order of the Coif and receiving the Urban A. Sontheimer Award for graduating second in the class. She also served in the Articles Department of the Stanford Law Review. After graduation, Professor Feldman clerked for The Honorable Joseph Sneed of the U.S. Court of Appeals for the Ninth Circuit. Professor Feldman specializes in Law and Science and is the Director of the Institute for Innovation Law. Professor Feldman’s first book, The Role of Science in Law, was published by Oxford University Press in 2009. Her second book, Rethinking Patent Law was published by Harvard University Press in 2012. Her articles have appeared in journals at law schools including Georgetown, Stanford, Texas, USC, UCLA and Virginia. Professor Feldman has received the Rutter Award for Teaching Excellence. Her piece, Patent and Antitrust: Differing Shades of Meaning, was judged one of the best intellectual property articles published in the United States in 2008. Professor Feldman has chaired the Executive Committee of the Antitrust Section of the American Association of Law Schools. In 2007, she served as the Herman Phleger Visiting Professor of Law at Stanford Law School.

About the Institute for Innovation Law

The Institute for Innovation Law is a public interest academic center at UC Law SF. The Institute engages in academic research and education to encourage innovation through the practice and development of law and policy. The Institute’s mission is to identify and promote the tools, knowledge, and skills needed to encourage innovation through the practice and development of law and policy.

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