Recently, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing to examine Senate Bill 3056, the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act of 2016. The bill was introduced by Senator Patrick Leahy on June 14, 2016, and targets "abusive delay tactics," such as when branded drug companies use existing Food and Drug Administration (FDA) safety programs and regulations to block the development of generic versions of their products.
At the hearing, senators heard from a panel of witnesses, including representatives from the American College of Physicians, the Consumers Union, the Heritage Foundation, and various academic and industry professionals. Support for the targeted approach of the bill was overwhelmingly supported by both senators and panelists alike.
All four co-sponsors of the bill delivered an opening statement: Senators Patrick Leahy, Chuck Grassley, Subcommittee Chairman Michael Lee, and Ranking Member Amy Klobuchar. Senator Leahy highlighted two specific delay tactics that are addressed within the CREATES Act: sample sharing (brand-name companies preventing potential generic competitors from obtaining samples of the branded product) and participation in a shared safety protocol (some brand-name companies refuse to allow generic competitors to participate in a required REMS with ETASU protocol, or impose a limited distribution system when a REMS is not necessary, undermining the generic's ability to gain FDA approval.) Under the Act, generic drug manufacturers would be able to bring an action in federal court for injunctive relief, should it find itself facing one of those delay tactics.
Senator Grassley opined that some of the tactics used by brand-name manufacturers may "frustrate the intent" of the Hatch-Waxman Act of 1984, which was enacted to streamline and expedite the approval process for generic drugs. Ranking Member Klobuchar went one step further, noting that some companies' current conduct "threatens the Hatch-Waxman legacy."
Chairman Lee noted that such delay tactics exploit the use of REMS, and that the CREATES Act addresses the issue appropriately, by not piling antitrust law on top of regulation.
Testimony by Panelists
Mr. Safir, Senior Counsel at Covington & Burling, was the only witness to speak in opposition of the CREATES Act. Mr. Safir shared two major concerns with the bill: (1) safety risks (he noted that "the CREATES Act does not establish robust criteria that eligible product developers seeking to obtain such a drug must satisfy in order to protect patients and other individuals who come into contact with the drug during its distribution") and (2) the 120-day negotiation period, stating that 120 days is a very short period of time and does not take into account the complexity of these proceedings, and such a short time period may have the unintended consequence of encouraging generics to sue brand-name companies rather than engage in shared REMS negotiations.
Ms. Zelnick-Kaufman, Assistant General Counsel at Amneal Pharmaceuticals, testified as to the challenges her company and other generic manufacturers face in obtaining samples and negotiating shared REMS agreements. She cited several examples from her own experience, noting that the CREATES Act provides "essential relief and remedies."
Professor Feldman is the Director of the Institute for Innovation and Law at UC Hastings and was able to provide some context to the concerns being discussed, pointing out that the limited distribution system was a tactic used by Martin Shkreli and Turing Pharmaceuticals during the period they were acquiring and raising the price of Daraprim.
Mr. Slover, Senior Policy Counsel at Consumers Union, testified about the results of a Consumers Union poll from March, which revealed that among consumers whose out of pocket drug costs are increasing, many will either skip doses or split them, put off doctor's visits, take expired medications, or postpone paying other bills to pay for their medications.
Mr. Abbott, the Deputy Director at the Heritage Foundation, believes that the Act would "promote welfare-enhancing competition in the market for brand name pharmaceuticals and biological products (biologics), and their lower-priced generic and biosimilar substitutes, without inappropriately undermining the intellectual property rights of individuals who bring forth new innovative medical treatments that greatly improve the quality of American healthcare" and "would not impose undue burdens on the manufacturers of brand name drugs and biologics."
Dr. Nitan Damle
The only practicing physician on the witness list, Dr. Damle is the President of the American College of Physicians, and voiced support on behalf of himself and the ACP for the CREATES Act and the broad push by Congress to control prescription drug costs.
Misuse of REMS and ETASUs
Chairman Lee showed a 2010 PowerPoint presentation, created by an unnamed law firm, that purported to show the pharmaceutical companies how to exploit the use of the FDA safety programs for the purpose of blocking competition and increasing profit. Mr. Safir noted that the PowerPoint seemed to be the work of a law firm who was marketing their services to a pharmaceutical company and should not be attributed to the industry overall. Mr. Safir commented that he does believe a bill like this "might be passed, but with additional protections."
Senators asked other members of the panel as to the validity of the safety concerns raised in Mr. Safir's testimony. Professor Feldman noted that the bill explicitly states that jurisdiction over patient safety issues remains with the FDA. Senator Al Franken had a different safety concern, noting that "rising drug prices are causing [his] constituents to forego lifesaving treatments."
Senator Orrin Hatch (one of the original sponsors of the Hatch-Waxman Act), shared concerns raised by Mr. Safir: he is concerned that a generic could purposely choose to not cooperate during the 120-day negotiation period, or purposely intend to sue a branded company. Professor Feldman stated that she believes the "adequate business justification" required in the bill is enough to protect against such "game playing," while Ms. Zelnick-Kaufman feels that generic companies are economically incentivized to engage in the negotiation, and that it would not be a problem in practice.
Senator Hatch and Senator Thom Tillis both spoke to their support of the intent of the bill, but want to ensure the correct balance is reached: to not disincentivize innovation by branded pharmaceutical companies.