July 5, 2012 | Posted By Bruce D. White, DO, JD

The Wednesday, June 27, issue of the Washington Post reported that the U.S. Senate passed a bill empowering the Food and Drug Administration (FDA) to collect about $6 billion over the next five years in new “user fees.” The bill passed the Senate 92 to 4 and now goes to the White House for President Obama’s signature.

The bill for the first time requires generic drug manufacturers to make payments to the FDA as part of the drug approval, manufacturing, and marketing process. “Innovator” (or what old-timers might recall as “ethical” or “brand name”) pharmaceutical manufacturers have been paying similar user fees since the passage of the Prescription Drug User Fee Act (PDUFA) of 1992. The user fees were seen as a “private industry” approach with manufacturers being required to shoulder some of the drug regulatory and safety processes costs. Generic manufacturers will contribute about $300 million annually. In return, the FDA has agreed to help speed the approval process for generics.

The bill also attempts to deal with the reported shortages of some drugs that have led to rationing and treatment delays recently. Because of consolidation within the generic drug manufacturing industry, some products – long marketed in the United States, but generating very little profit after expenses – have been in extremely short supply. This problem has been reported in the press for several years now. The more commonly reported cases deal with cancer drugs and anti-seizure medicines. (For example, see Gardiner Harris’ “U.S. Scrambling to East Shortage of Vital Medicine.")

However, do the user fees offer the right balance when dealing with generic manufacturers and the availability of some “unprofitable” drugs? Will the additional costs from the user fees drive up overhead and reduce profits to even lower levels, thereby forcing some generic manufacturers to expand the list of non-profitable products and increasing the odds that some drugs will be in short supply in the future? Is this a “whac-a-mole” problem? Will solving one difficulty only exacerbate another?

Shortages of little-profit generic drug products are certain to get worse in a free-market economy. It’s hard to believe that market or “private industry” options will even exist without the federal government taking an active role in either supplying the products directly or indirectly with financial incentives of some sort or partnerships with non-profit, quasi-governmental entities. What’s the real benefit of raising taxes – although indirectly with user fees – on generic manufacturers, only to somehow incentivize them directly or indirectly to make and supply non-profitable medicines? How fair or reasonable is this?

The Alden March Bioethics Institute offers graduate online masters in bioethics programs. For more information on the AMBI master of bioethics online program, please visit the AMBI site.


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