Exploring the Vulnerabilities and Challenges in America’s Generic Drug Industry

TL/DR –

The US’s system of unregulated prescription drug pricing, which relies on generic drug manufacturers to keep prices low, is facing serious challenges. Generic drugs, which fill 9 out of every 10 prescriptions in the US, are being hit by two issues: older generic drugs have become too cheap, forcing manufacturers to cut corners or exit the market, causing shortages and quality problems; and newer, expensive brand-name drugs are going without generic competition for up to 20 years. The Federal Trade Commission is working to crack down on brand companies’ strategies to stifle competition, and a draft bipartisan bill in Congress aims to make markets for cheaper drugs more attractive and reliable for manufacturers.

Affordable Prescription Drugs in the U.S.: Challenges and Solutions

The U.S. allows the free market to dictate prescription drug prices, a policy established four decades ago. This approach was meant to facilitate the entry of generic drug manufacturers, thereby lowering drug prices. According to the FDA, it has saved trillions of dollars over the years. However, this system is facing potential issues.

The question arises: Why is this happening, and what are policy makers doing to address it? A special series called Race to The Bottom by Tradeoffs delves into the vulnerabilities of America’s generics supply system.

Generic drugs are the backbone of American health care. They account for 90% of prescriptions. They handle ailments like cholesterol, diabetes, depression, etc. Still, the industry faces challenges, mainly due to drugs becoming too cheap, leading to quality and availability issues or no generic competition for some costly brand-name drugs.

Big pharmaceutical companies have creative strategies to stifle competition, including playing games with patents and financially incentivizing middlemen to favor their products over cheaper generics. This hinders the market for generic drugs.

The U.S. has also been grappling with drug shortages, particularly since the pandemic. A recent report suggests that drug shortages are at a decade high, lasting on average three years. Manufacturing has moved to countries like India and China due to low prices, affecting the quality and reliability of drugs.

Policy makers are acting to stabilize the industry. The Federal Trade Commission is trying to intervene and address unfair practices by brand companies. There’s a bipartisan bill in Congress aimed at making the market for cheap drugs more appealing and reliable for manufacturers.

However, some believe more profound reforms are needed. Alfred Engelberg, an architect of the Hatch-Waxman Act, which kickstarted the generic industry, argued that the laws need to adapt to the changing times.

For more insights, check out the special series Race to The Bottom available on podcast platforms.

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