Over at the Drug Channels blog, Adam Fein discusses new legislation offered by Senator Hatch (R, UT) that attempts to address the underlying causes of the generic drug shortages that are currently plaguing America's health care system:
When drug shortages were in the news last fall, I (among others) cited the perverse economic incentives from Average Sales Price (ASP) as a key factor behind our very fragile generic injectable supply chain. ...
To my surprise, politicians have heard the message. Senator Orrin Hatch (R-UT) is now drafting the "Patient Access to Drugs in Shortage Act," which will change reimbursement for generic injectables from ASP + 6% to Wholesale Acquisition Cost (WAC) for injectable generics with 4 or less manufacturers. ...
Three items in the draft legislation relate directly to the broken incentive system:
•Price Stability--The Medicare reimbursement rate for generic injectable products with 4 or fewer active manufacturers would increase from ASP + 6% to WAC.
•Medicaid/340B Rebate Exemption--Generic injectable products with 4 or fewer active manufacturers would be exempt from Medicaid rebates and 340B discounts.
•Extended Exclusivity--Manufacturers who hold an approved application for a drug that would mitigate a shortage can extend by 5 years any period of exclusivity.
These fixes start to address the fact that the reduced return on investment from generic injectable manufacturing has created the enabling conditions for drug shortages.
Adam also links to my own take on the drug shortage problem, as well as a podcast where he and I discuss the underlying economics affecting the market for generic drugs, particularly sterile injectables.
Drug Channels is also a terrific blog. Check it out, if you haven't already.