Most medications used to be expensive – much more expensive than they are today. As recently as the early 1980s, most important drugs on the market were brand names under patent protection. Generics were uncommon; the cost of developing and marketing them in competition with the big brands was too high. Without change, the relative ease with which most of us get and use prescription drugs today might have been quite different.
Change came in the form of the Hatch-Waxman Act, the law – its 30th anniversary is this year – that established the modern system of generic drug regulation in the United States. Its original sponsors, Rep. Henry Waxman (D., Calif.) and Sen. Orrin Hatch (R., Utah) brokered a critical bipartisan compromise to ensure the bill’s passage
How did this action three decades ago shape our health-care system today? Consider this: between 84% and 86% of all drugs prescribed today are generics. The act was the culmination of decades of discussions about the need to encourage competition in the drug industry as a primary means of lowering drug prices and constraining overall growth in medical costs. It wasn’t always this way. Looking back 30 years, Henry Waxman recalls “a generic drug industry in decline” because companies found it too costly to submit their products for approval when they had to conduct the same extensive and clostly clinical testing required of brand-name manufacturers. The makers of “innovator” (new) drugs also had complaints, chiefly about the length of time it took to get them approved by the Food and Drug Administration.
The Hatch-Waxman Act expedited the process for generic drugs by permitting the FDA to approve applications for versions of brand-name drugs without repeating the original clinical studies. It also made it possible for innovator drug manufacturers to apply for up to five years of additional patent protection for their new medicines to compensate them for time lost while their products were going through the agency’s new drug approval process. The law proved its worth. Once several generic manufacturers entered the marketplace with a generic drug formulation, the prices of some medications plunged by as much as 80%.
According to FDA regulators, the biggest surprise in implementing Hatch-Waxman, was and remains the sheer number of applications submitted to the agency for review. The first inkling came on Oct. 24, 1984, the first day that generic drug applications could be filed. A truck pulled up to the Office of Generic Drugs’ loading dock with multiple generic drug applications. The medical officer charged with receiving the applications had to find more storage space – fast! – because the first truck was soon followed by others. It quickly became clear that generics would be a very competitive field.
The trucks (and other vehicles) have continued to roll on up to the dock. In 2002, the director of the generic drugs office reported a “Woodstock-like” environment in which “campers” began to appear in the parking lot three weeks before their eligible filing date. The office reportedly found this “mildly amusing” but knew the situation could not continue. After the owner of the building complained, the FDA finally issued new filing guidelines. With a snoring camper on the cover, it was known simply as “The Camping Guidance.” For more on the history of the FDA and its role in health, medicine, and consumer protection, click here.
The Hatch-Waxman Act is far from perfect. It is legendary for having been a difficult law to both pass and interpret because it contains so many compromises. A frustrated judge trying to interpret a particularly difficult provision was heard to say that there is “a special place in hell for people who write these things.” No one seems to have disagreed with him.
To date, FDA has received about 27,000 Abbreviated New Drug Applications (ANDAs) for generic medicines and has approved more than 9,000. At a recent conference, Henry Waxman expressed continued confidence in what he described as Hatch-Waxman’s “balanced approach” to making less expensive medicines available sooner while assuring that it remained profitable to develop innovative new drugs. He cited, as his best evidence, the fact that both generic and innovator drug industries are thriving and that pharmaceuticals remain one of the most profitable sectors of the U.S. economy.
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