A Priority Review Voucher Program to Fuel Generic Drug Development
July 06, 2023
Attempts to curtail the cost of pharmaceuticals by both political parties have drastically increased as millions of Americans are unable to fill their prescriptions due to cost, leading to lapses in medication adherence which can cause worsening of chronic disease. A strategy that emphasizes the use of targeted policy levers to encourage competition and bring down prices for patients and insurers could better tackle this challenge. This paper examines a specific market – limited or no competition small molecule generic markets – and retools a targeted policy lever in the form of expanding the FDA’s Priority Review Voucher (PRV) in order to lower costs without disincentivizing innovation.
The Hatch-Waxman Act of 1984 is widely credited as the successful foundation upon which the generic drug market is built, with generics represents one of the most significant cost saving policy levers within the US health care system. Between the years 2010 and 2020, low cost generic drugs saved consumers an estimated $2.4 trillion. The small molecule generic market faces many challenges, as the FDA stands witness to a steep decline in the number of submitted ANDAs representing a credible threat to generic competition: there were 806 in FY2021 compared to 1,306 in FY2017.
In 2006 Congress created the Tropical Disease PRV, which provided a PRV in exchange for developing products for tropical diseases. A PRV allows a company to have FDA product review completed within six months instead of ten, with the four months of marketing and exclusivity gained representing a more significant revenue period. Recognizing the boon to drug development and product market entry, Congress has expanded the PRV program twice to include rare pediatric diseases and material threat medical countermeasures. A report by the Government Accountability Office (GAO) found that, despite some hindrances, the PRV program was at least a factor, if not pivotal, in developing new drugs.
Just as PRVs incentivized the creation of new drugs, they could also increase competition in the generic market. An expansion of PRV for drugs that are entering the market with limited competition or no competition (as determined by the Herfindahl-Hirschman Index) and are of critical importance would promote generic market entry. Additionally, applicants would be required to produce and market for the sale any limited competition generic PRV (LCG-PRV) product for 3 years, addressing concerns that PRVs promote entry without access. As a nonpartisan solution, expansion of the PRV program would revitalize generic markets and solve the “Martin Skhreli” problem in generic markets.
