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New Analysis Finds $5.4 Billion In Annual Lost Savings From Strategies Geared Toward Delaying Generic Drug Entry
Date:7/23/2014

WASHINGTON, July 23, 2014 /PRNewswire-iReach/ -- Use of Risk Evaluation and Mitigation Strategies (REMS) and other restricted access programs to delay generic market entry results in $5.4 billion in lost savings annually, according to a new survey and analysis by economic consulting firm Matrix Global Advisors (MGA).

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Required by the Food and Drug Administration (FDA) for certain small-molecule drugs and biologics, REMS programs are intended to improve drug safety by ensuring that the benefits for patients outweigh the risks. However, new survey results indicate that brand drug manufacturers use REMS programs and other distribution restrictions to prevent generic drug manufacturers from accessing drug samples. Because a generic drug manufacturer must test a product it is developing against a sample of the brand drug to ensure bioequivalence, this obstruction delays generic market entry and the savings generic drugs offer.

"Nearly 40 percent of new FDA drug approvals are now subject to REMS," noted Alex Brill, CEO of MGA and author of the study. "The lost savings arising from misuse of these programs has a direct effect on the cost of health care for consumers, private payors, and government."

The MGA analysis, sponsored by the Generic Pharmaceutical Association, examines forty small-molecule drugs that a survey of generic companies identified as restricted. Using U.S. sales, utilization, and price data from IMS Health, MGA estimates that the delayed market entry of generics for these products results in annual lost savings of $5.4 billion. Of this, the federal government bears a third of the burden, or $1.8 billion. Private insurance companies lose $2.4 billion, and consumers pay $960 million in extra out-of-pocket costs. State and local governments and other small payors lose savings of $240 million.

REMS misuse can be expected to extend to biosimilars once the FDA provides final guidance for biosimilars to enter the market. MGA estimates that delayed biosimilar entry from restricted access to biologics samples would result in approximately $140 million in lost savings for every $1 billion in biologics sales. In 2013, U.S. biologics sales totaled approximately $92 billion, or 28 percent of U.S. drug spending that year.

ABOUT MGA

Matrix Global Advisors (MGA) is a Washington, DC-based economic consulting firm led by Alex Brill. MGA engages in consulting and analysis on a range of health care, tax, and other policy matters. Prior to founding MGA, Brill served as policy director and chief economist to the House Ways and Means Committee and on the staff of the White House Council of Economic Advisers.

For media inquiries, please contact Jonathan Toomey at 202-558-7159.

Media Contact: Jonathan Toomey, Matrix Global Advisors, 202-558-7159, jtoomey@matrixglobaladvisors.com

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SOURCE Matrix Global Advisors
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