Generic Drug Names and Social Welfare

This article studies how well International Nonproprietary Names (INNs), the “generic” names for pharmaceuticals, address the problems of imperfect information. Left in private hands, the identification of medicines leads to confusion and errors. Developed in the 1950s by the World Health Organization, INNs are a common, global, scientific nomenclature designed to overcome this failure. Taking stock after sixty years, we argue that the contribution of INNs to social welfare is paramount. They enhance public health by reducing errors and improving patient safety. They also contribute to economic efficiency by creating transparency as the foundation of competitive generic drug markets, reducing transaction costs, and favoring trade. The law in most countries requires manufacturers to designate pharmaceuticals with INNs in labeling and advertising. Generic substitution is also permitted or mandatory in many countries. But not all the benefits of INNs are fully realized because prescribers may not use them. We advocate strong incentives or even legally binding provisions to extend the use of INNs by prescribing physicians and dispensing pharmacists, but we do not recommend replacing brand names entirely with INNs. Instead, we propose dual use of brand names and INNs in prescribing, as in drug labeling.

via Generic Drug Names and Social Welfare.

The Politics and Strategy of Industry Self-Regulation: The Pharmaceutical Industry’s Principles for Ethical Direct-to-Consumer Advertising as a Deceptive Blocking Strategy

As the pharmaceutical industry lobbies European regulators to permit direct-to-consumer advertising (DTCA) of prescription drugs in the European Union, we found that five leading companies violated industry-developed and -promulgated standards for ethical advertising in the United States. Utilizing multiple data sources and methods, we demonstrate a consistent failure by companies that market erectile dysfunction drugs to comply with the industry’s guiding principles for ethical DTCA over a four-year period despite pledges of compliance by company leaders. Noncompliance resulted in children being exposed to sexually themed promotional messages more than 100 billion times. We argue that the guidelines are a coordinated effort by the industry to prevent unwanted federal regulation, and we introduce the concept of a blocking strategy to explain company behavior and to advance theoretical understanding of firms’ public affairs strategies. We recommend policy responses to prevent deceptive practices, protect children from adult content, and promote genuine health care education.

via The Politics and Strategy of Industry Self-Regulation: The Pharmaceutical Industry’s Principles for Ethical Direct-to-Consumer Advertising as a Deceptive Blocking Strategy.

House Democrats report most states provide little oversight of compounding pharmacies – The Washington Post

Congressional investigators say pharmacy boards in nearly all 50 states lack the information and expertise to oversee specialty pharmacies like the one that triggered a deadly meningitis outbreak last year.A report released Monday by House Democrats shows that most states do not track or routinely inspect compounding pharmacies. Staffers surveyed officials in 50 states about their oversight of pharmacies and then compiled the responses.

via House Democrats report most states provide little oversight of compounding pharmacies – The Washington Post.

Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market by Joanna Shepherd :: SSRN

Pharmacy benefit managers (PBMs) save Americans billions of dollars each year by lowering the prices of prescription drugs and the costs of prescription drug coverage. However, as I explain in this Article, mandatory disclosure regulations recently enacted in several states and under the Affordable Care Act threaten to disrupt the cost savings PBMs currently produce for consumers. These regulations require PBMs to disclose competitively-sensitive financial information to various participants in the prescription drug market. Although mandatory disclosure regulations are premised on the idea that PBM clients can only ensure that they are paying a competitive price for PBM services if they know the specifics of PBMs’ financial arrangements with pharmaceutical manufacturers and pharmacies, there is no theoretical or empirical reason to believe mandated disclosure of this information is necessary. Not only are these regulations unnecessary to achieve competitive outcomes, they also impose significant costs on PBMs. The additional disclosure increases both direct costs and litigation costs for PBMs. More importantly, the regulations foster tacit collusion and reduce PBMs’ ability to negotiate discounts with pharmacies and rebates with drug manufacturers. By disrupting competition in the prescription drug market, mandatory disclosure regulations will ultimately increase the prices that consumers pay for prescription drugs.

via Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market by Joanna Shepherd :: SSRN.

Collective Action and Individual Choice: Rethinking How We Regulate Narcotics and Antibiotics by Jonathan Anomaly :: SSRN

Governments across the globe have squandered treasure and imprisoned millions of their own citizens by criminalising the use and sale of recreational drugs. But use of these drugs has remained relatively constant, and the primary victims are the users themselves. Meanwhile, antimicrobial drugs that once had the power to cure infections are losing their ability to do so, compromising the health of people around the world. The thesis of this essay is that policymakers should stop wasting resources trying to fight an unwinnable and morally dubious war against recreational drug users, and start shifting their attention to the serious threat posed by our collective misuse of antibiotics.

via Collective Action and Individual Choice: Rethinking How We Regulate Narcotics and Antibiotics by Jonathan Anomaly :: SSRN.

Understanding and Incentivizing Biosimilars | Jason Kanter and Robin Feldman

Congress recently passed the Biosimilars Act in an attempt to replicate the success that generic small molecule drugs have enjoyed under the Hatch-Waxman Act. The Biosimilars Act provides a pathway for biosimilars to achieve quicker and less expensive FDA approval than what is required for a new biopharmaceutical. There is, however, greater uncertainty and cost associated with achieving the coveted biosimilarity status. This reflects the complex production methods of biopharmaceuticals, along with the many factors that can alter the structure and function of such drugs.

This Article analyzes the Biosimilars Act and the draft guidances recently released by the FDA. The Article identifies areas of uncertainty and other aspects of the current regime that create disincentives for the development of biosimilars, as well as suggesting improvements. If we are serious about reducing the price of biological drugs and encouraging the creation of biosimilars, we will need to develop a more effective pathway for approval. This is no easy task. The greater risks associated with the production of biosimilars should prompt a fair degree of caution in establishing the pathway for approval. Balancing consumer safety with appropriate market incentives is a delicate mission. Nevertheless, under the current regime, we risk the possibility that companies will focus on developing so-called biodifferents and biobetters (new drugs designed to mimic an existing biological drug), completely forgoing the opportunity to develop biosimilars.

The loser, of course, is the consumer. It is doubtful that biobetters and biosimilars will have the same price-lowering effects as generics. These drugs will be patented, creating full exclusivity in the market, and prices will remain high in the biological drug space. It would be unfortunate if the tremendous energy and creativity invested in designing and implementing the Biosimilars Act were to have very little effect in the long run. Full article.

Effects of Pharmaceutical Promotion: A Review and Assessment by Dhaval Dave :: SSRN

This review discusses the role of consumer-directed and physician-directed promotion in the pharmaceutical market, based on the classic conceptual framework of whether such promotion is “persuasive” and/or “informative”. Implications for public health and welfare partly depend on whether, and to what extent, advertising: 1) raises “selective” or brand-specific demand versus “primary” or industry-wide demand; 2) impacts drug costs; and 3) impacts competition. Empirical evidence from the literature bearing on these effects is surveyed. These studies show that pharmaceutical promotion has both informative and persuasive elements. Consumer advertising is more effective at enlarging the market, educating consumers, inducing physician contact, expanding drug treatment, and promoting adherence among existing users. Physician advertising is primarily persuasive in nature, effectively increasing selective brand demand. Evidence bearing on the effects of promotion on competition and prices is more limited. However, there is no strong evidence that drug promotion deters entry, and there is some suggestive evidence that it may even be mildly pro-competitive. With respect to costs, some studies suggests that consumer advertising may weakly raise the average wholesale price, which is a manufacturer’s list price, but there is no strong indication that either consumer- or provider-directed promotion substantially raises retail-level prices. However, this is not to imply that potential promotion-driven substitution from non-advertised to advertised drugs cannot have effects on total drug costs. While most of these effects point to potential welfare improvements as a result of pharmaceutical promotion, there is also evidence that consumer ads may induce overuse and overtreatment in certain cases. Market expansion, overtreatment and shifting brands for non-therapeutic reasons further raise the concern of a sub-optimal patient-drug match at least for some marginal patients. A comprehensive evaluation of the welfare effects of pharmaceutical promotion requires a balanced assessment of these benefits and costs.

via Effects of Pharmaceutical Promotion: A Review and Assessment by Dhaval Dave :: SSRN.

FDA Wants to Regulate Drug Firms on the Internet. Its Targeting Facebook “Likes” – Forbes

the warning letters show that FDA is ramping up its regulatory activity over the use of Internet tools by regulated companies.

The FDA has been pressed to issue explicit guidance on how it intends to regulate Internet advertising (and social media in particular). But the agency has resisted. It seems that FDA’s policy on Internet promotion is going to unfold in the same manner that the agency has traditionally laid out its regulatory policy over advertising and marketing — piecemeal, one warning letter at a time.

FDA has historically been reluctant to publish clear guidance when it comes to how it regulates promotion. The agency worries that writing down its policies on paper could invite legal challenges to its authority over the underlying commercial speech, which courts have often recognized is protected under the First Amendment.

via FDA Wants to Regulate Drug Firms on the Internet. Its Targeting Facebook “Likes” – Forbes.

Copyright and Trademark Issues in the Pharmaceutical Industry: Generic Compliance or Brand Drug Imitating: ‘Copycat or Compliance’ by Roseann B. Termini, Amy Miele :: SSRN

Imitation is the sincerest form of flattery; that is, unless the imitation is of a product produced by a multi billion-dollar industry. Then, imitation has the potential to involve intellectual property litigation. For the pharmaceutical industry, the majority of intellectual property litigation stems from the interplay between generic or imitator drug and brand name or pioneer drug manufacturers.

via Copyright and Trademark Issues in the Pharmaceutical Industry: Generic Compliance or Brand Drug Imitating: ‘Copycat or Compliance’ by Roseann B. Termini, Amy Miele :: SSRN.

Undue Process at the FDA by Lisa Heinzerling :: SSRN

For over 40 years, the Food and Drug Administration has been collecting evidence that the routine administration of antibiotics to animals destined for the food supply contributes to the development of antibiotic-resistant infections in the human population. For all these years, the FDA has put off acting with any force on this health risk. The agency’s explanation has been that the Food, Drug and Cosmetic Act requires it to hold time- and resource-intensive formal hearings before it can withdraw approvals for antibiotics used for the purposes of promoting growth and preventing infection in food animals. In so arguing, the FDA has ignored decades of developments in administrative law and has misread its own statute. The FDA has the discretion under the law to act on antibiotics in animal feed without going through the years-long process of formal hearings. At the least, the agency owes the public an explanation of why it has insisted on pursuing the longest possible path to protecting human health.

The FDA’s legal error is, in principle, simple enough to correct. Far less remediable are the habits of mind that entrench agency inaction, including institutional memory that privileges stasis over change and systematic acceptance of absurdly long timelines for addressing social problems. Equally immobilizing are statutory grants of epistemic authority to particular individuals within large bureaucratic institutions, which allow these institutions officially to deny certain facts about the world even while they report them as the truth.

via Undue Process at the FDA by Lisa Heinzerling :: SSRN.