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Each week, Health Affairs' Rob Lott brings you in-depth conversations with leading researchers and influencers shaping the big ideas in health policy and the health care industry.
A Health Podyssey goes beyond the pages of the health policy journal Health Affairs to tell stories behind the research and share policy implications. Learn how academics and economists frame their research questions and journey to the intersection of health, health care, and policy. Health policy nerds rejoice! This podcast is for you.
Hello, and welcome to a health podocy. I'm your host, Rob Lott. And I'm delighted to be here with a live audience today on another very special episode of the podcast. Whereas typically, the show is just me and our guest talking all about their paper, today, we're recording on October 22. We'll be calling on the insight and perspective of a live audience by asking them to weigh in with their own questions for our guests.
Speaker 1:We do live recordings like this every few months, and it's always a lot of fun. So thank you all for being here, and thank you especially to our guest, doctor Jennifer Kao, an assistant professor of the UCLA Anderson School of Management. Together with her coauthors, doctor Kao has a new article in the October issue of Health Affairs studying REMS, that is risk evaluation and mitigation strategies, the formal term for specific safety requirements that the FDA can impose on specific drugs when approving them. Their paper looks at the impact of the presence of REMS on generic pharmaceutical approvals. Now generic drugs have played an important role in the pharmaceutical market going all the way back to the Hatch Waxman Act of 1984, And we know well that when generic drugs become available, that competitive pressure brings down prices dramatically.
Speaker 1:But over the last forty years, we've also seen an array of additional policies and regulations as well as complex business and legal tactics employed by key stakeholders, all of which directly and indirectly affect generic entry into the market. Some of those strategies have been well studied. Others, we're just now beginning to understand. And I think it's fair to say that REMS, as a factor on generic entry, fall into that latter category. That is policies whose impact we're still working to measure and fully appreciate.
Speaker 1:That's why we're so lucky to have doctor Kao with us here today. Doctor Kao, welcome to the podocy.
Speaker 2:Thank you. I'm delighted to be here.
Speaker 1:Alright. Well, let's just dive in. I talked very briefly about REMS just now in the introduction. Congress granted that authority to, the FDA in 02/2007. Can you describe the landscape at that time?
Speaker 1:And since then, why was it necessary to establish this process and how widespread have they been over the last eighteen years?
Speaker 2:So before 02/2007, the FDA had limited tools to oversee a drug once it went to market. After high profile safety cases like Vioxx, there was a growing concern that the agency didn't have enough authority to manage risk effectively once a drug went on to the market. At the time, its main option was to pull a drug off the market, which is not an easy process. So in response, in 02/2007, Congress passed the Food and Drug Administration Amendments Act, which gave FDA the authority to require post marketing safety studies and importantly to mandate REMS. And the goal here was to strike a balance by allowing important but high risk drugs to enter and stay on the market, while putting safeguards in place to ensure that the benefits of use outweigh the risks.
Speaker 2:Now these safeguards can range from simple measures such as medication guides, communication plans, to more complex elements to assure safe use. And this can include required prescriber certification, patient testing and registration, as well as controlled distribution. Now today, there are about 70 active REMS programs with most of them having these much more complex requirements.
Speaker 1:Got it. So you alluded a a little bit to some of the kinds of strategies that a REMS might require. Can you give us some sort of concrete examples? Maybe an example or two of a REMS doing well, what REMS were theoretically at least intended to do when the program was established?
Speaker 2:So a well known example is the isotretinoin REMS program called iPLEDGE. Isotretinoin, which is often referred to by its original brand name Accutane, is an effective acne medication, but it can also cause serious birth defects if used during pregnancy. So to prevent fetal exposure, the iPLEDGE program requires among other things women of reproductive potential to undergo monthly testing and to use two forms of contraception. Now research shows that this REMS program has been fairly effective. A study conducted by co author Amit Sarpatwari found that the incidence of pregnancy amongst patients using isotretinoin is seventy to eighty percent lower compared to those using comparable drugs.
Speaker 2:And you can think of this as a case of a REMS program doing what it is meant to do, which is to maintain access to a useful drug while still meaningfully reducing risk. I do want to note though, many providers and patients have found the program to be fairly restrictive. Another quick example of a REMS program is the PEG Valiers REMS program. PEG Valiers is used to treat a mere metabolic disorder called PKU. Because the drug can cause severe allergic reactions, its REMS program requires patients to carry an EpiPen.
Speaker 2:And you can think of this as a fairly low burden but effective safeguard.
Speaker 1:Got it. Okay. So a fair amount of variation there. As you note in the paper, REMS have also been used in a way or in ways that may delay patients' access to generic versions of the drug, essentially, keeping the price higher, for longer as a result of that delay. What are some of the the mechanisms that you've identified by which this happens?
Speaker 2:There are three main ways we know that this can occur as a strategy to delay generic competition. So first, some companies patent their REMS programs. For example, they may patent the method in which they distribute their drugs and then argue first that a generic using a similar system would infringe on the patent, and second, that having a second REMS program for the same drug that didn't infringe on the patent would be unsafe. And this is common. One study led again by my co author Amit Sarpabwari found that one in five drugs with REMS had these kinds of REMS patents.
Speaker 2:A well known example is Celgene's thalidomide. Thalidomide is the drug used to treat multiple myeloma, which can also cause serious birth defects as a side effect. Now, Celgene sued a generic manufacturer, claiming that the generic manufacturer's proposed REMS would infringe on their REMS patents, and later the generic manufacturer dropped its application. Now a second way that firms may delay generic entry is that some firms may refuse to provide drug samples that generic companies need for bioequivalence testing. These firms may say that providing drug samples would violate REMS related distribution restrictions.
Speaker 2:The challenge is that without these samples, can't get approved. And that's what happened to Actelion's Bocetan. Bocetan is a pulmonary hypertension drug that can cause liver damage as a side effect. Now under its REMS program, the drug is distributed through certified pharmacies and Actillion claimed that these safeguards prevented it from supplying samples to potential generic competitors. Finally, a third way that firms may delay generic entry is by simply being uncooperative in developing a shared REMS program with generic manufacturers, which is something that the FDA can require.
Speaker 2:These delays can slow FDA approval of the generic drug. An example of this is Suboxone, which is a combination medicine containing bufrenorphine and naloxone and is used to treat opioid dependence. It has been alleged that its manufacturer, Reckitt Benkissler, refused to cooperate with generic manufacturers in developing a shared REMS program. And these delays could effectively slow generic entry.
Speaker 1:Got it. So on that last factor there, basically, FDA can say to the generic manufacturer, you've got to cooperate and work together with the brand name manufacturer and develop, REMS that you sort of both share, and the brand name manufacturer sort of drags its feet. Is that what's
Speaker 2:That's right. And this can occur through being uncooperative when it comes to setting up meetings, things like that. So that's how they might be able to drag their feet.
Speaker 1:Wow. Okay. So we have a case by case sense that these strategies are delaying generic approvals. You just gave us some of those those examples. Your paper tried to assess the delays and systematically measure just how extensive they are.
Speaker 1:Can you share with us some of your top line findings?
Speaker 2:So we were motivated to say this because there have been really interesting examples, individual examples suggesting that REMS could delay generic competition. But as we noted there, we wanted to systematically examine this because there hadn't been, to our knowledge, any work that systematically did this, at a larger scale. So what we did was that we found nearly all small molecule drugs approved between 02/2013. This time window gives us a nice, post, post approval time window to examine generic entry. And we tracked whether each of these drugs had a REMS, and importantly, how long it took for a generic alternative to be approved, if at all.
Speaker 2:And what we found was that drugs with REMS were consistently associated with longer times to generic approval. Specifically, drugs with REMS took about 25% longer to get their first generic approval relative to drugs without REMS. This delay is roughly two point nine additional years. And this delay was noted even after accounting for factors such as disease area, patent protection, and the initial timing of approval. I'll note that this is a fairly large delay, and this is likely an upper bound as there might be other other unobservable factors that can contribute to the delay.
Speaker 2:Even so, it does suggest that REMS might meaningfully delay generic entry.
Speaker 1:Wow. Those are those are pretty significant numbers. I'm curious how these findings maybe align with any expectations you may have had before running these numbers. Obviously, you had a suspicion or an inclination that there might be something going on here. How surprised or unsurprised were you to come up with these results?
Speaker 2:So we did expect some delay, as you noted. Developing a shared REMS between a brand and a generic manufacturer can be complex. It can take time. But we were surprised by how much longer it took. A 25%, delay in generic entry timing is substantial.
Speaker 2:And it's particularly striking given that these drugs are often critical. And so we were fairly surprised by the exact magnitude of these effects.
Speaker 1:I'm wondering if there's a counterargument that goes something like, the fact that these drugs have REMS suggests that there's something inherently different about them. There are simply more elements and factors for, regulators to assess and monitor before approving a drug. So maybe it's only natural for generic approval to take longer. What what do you make of that argument?
Speaker 2:So this is an issue we thought a lot about. It's true. Drugs with REMS may be riskier or more complex than those without, so you might expect some delay. And we didn't wanna compare a treatment for cancer to a treatment for something such as seasonal allergies. And so to address that, we tried our best to make an apples to apples comparison.
Speaker 2:In our analysis, we included controls for a drug's disease area and whether it had a warning. That way we might be able to compare drugs that were similarly risky but differed in whether or not they had a REMS. And again, even after counting for all of that, there was still a significant delay in generic approval, which does suggest that REMS programs might play a unique role in shaping generic entry.
Speaker 1:Got it. Okay. You you mentioned, sort of accounting for a number of these factors. Two of them that you mentioned in the paper, are the year the original drug was approved and another, the potential market size of any given drug. Can you say a little more about how you see those factors potentially affecting your primary outcome, the time to generic approval.
Speaker 2:So accounting for these factors in our analysis helped ensure that the delays we observed weren't just due to broader trends or differences in financial incentives, but rather something specifically related to the REMS process. So by including year of approval, we wanted to account for changes over time. For example, whether or not the FDA had shifted their approach to helping facilitate the design of REMS programs, whether there was unique opportunities or challenges when it comes to developing generic products. We also wanted to include, for example, market size since there might be more generic entry in larger markets simply because larger markets may offer greater financial incentive. So to account for these factors was certainly very important for us.
Speaker 2:And using year of approval, using market size was a nice proxy that we could use to do that.
Speaker 1:That's great. All right. Well, let's let's start calling on some friends from the audience here. I see we have a hand raised from my colleague Jessica Beilander.
Speaker 3:Hi Jennifer, this is Jessica Bylander from Health Affairs. I obviously, enjoyed working on this paper with you. So, and sorry if you've you kind of addressed this and I missed it, but, I'm struck that like obviously you don't wanna get rid of the safeguards, but you also don't want folks to game the system. So could you say maybe a bit more about how some balance might be found between sort of the two goals?
Speaker 2:Absolutely. So this sort of gets to the main motivation for the paper. One of the motivations of the paper was to, of course, document empirical evidence, but the second was to think about how might this be useful for policymakers when it comes to allowing them to encourage drugs to come onto the market, but at the same time, making sure that we weren't preventing accesses to drugs that were affordable and safer. And so one way in which there might be some improvements that are concrete might be to strengthen the role of the FDA, for example, in ensuring that REMS programs that do exist can operate a little bit more efficiently. So one way you might see this happen is, you know, the FDA, for example, they might be able to play a stronger role in ensuring that shared REMS programs, are developed smoothly.
Speaker 2:The the agency did issue guidance in thousand eighteen to help, with the collaboration between brands and generics, but the impact isn't, yet clear. These types of actions might help ensure that programs put in place, such as REMS, that are aimed at including safeguards, still can exist, at the same time making sure that there can still be a good pathway for alternatives. So things like that could be particularly effective.
Speaker 1:So I'm wondering, doctor Kao, if you can say a little bit about what we know about the sort of relationship between delays to generic approval and the costs of drugs or the additional, you know, expenditures on drugs, due to that delay. I know this is a little outside of the area of this paper, but, what does the evidence show about the consequence of those kinds of delays?
Speaker 2:Absolutely. So thing we do so the right thing we know is that when it comes to generic entry, they can have a substantial impact on prices and therefore access. So existing evidence tells us that the price can fall by 80% or more when a generic alternative comes onto market. Now, when it comes to the REMS program itself influencing the impact on generic entry and the cost implications of that, that's actually something that has not yet been calculated. But we really hope that this piece of evidence that we have will be a good stepping stone for analyses like that.
Speaker 2:One can imagine that we would want to know information about generic substitution rates associated with drugs covered under REMS. We would also then want to know about what are some of the relative prices for these REMS specific drugs, because and and then having those pieces together could be useful ingredients to really get a sense of the overall ramifications for this of this delay, because again, a 25% delay is pretty substantial.
Speaker 1:I often, when we are sort of looking at a paper and thinking about its implications, I love to sort of go back to the starting point. So for example, in this case, I think it was 2007 when FDA was given the authority to require these REMS and imagine what policymakers were thinking or maybe what they were missing when they developed that policy. Do you have a sense of whether or not anyone could have predicted the impact of these REMS at that point? You know, the generic market was pretty robust. Could we have foreseen what was going on here twenty years ago?
Speaker 1:Or is it just the sort of the nature of the way these policies evolve that there are unintended consequences that we can't foresee?
Speaker 2:My sense is that often given how difficult it is to design effective policy and given how and in my other work, I have observed that regulations can often have unintended consequences and that firms, stakeholders in the health care industry, they're very smart. They understandably want to protect their profits if it's a company developing a drug. Oftentimes the very well intentioned policy that the FDA might put out might lead to actions by companies that might challenge the original intention of the regulation. And so my sense is that given all these various mechanisms, whether it's brand manufacturers unwilling being unwilling to share samples or having REMS protected patents or being unwilling to participate in shared REMS programs. It was my optimistic perspective is that it was likely challenging to foresee all of these challenges.
Speaker 2:That said, there has been a history, and there are many mechanisms in which brand manufacturers in the past have historically tried to protect their branded products from generic entry. So for example, the idea that there might be REMS related patents is related to the idea that there might be patent tickets that brand manufacturers have imposed in the past. So it's not completely a surprise, but my sense is that it was hard to anticipate all the different mechanisms in which firms might have challenged the original intention of the REMS program.
Speaker 1:We've got a audience question here, Leslie Erdulak.
Speaker 2:So your study focuses on The US market. And, you know, I'm just curious, if you were to take this research and replicate it in Europe or Canada or other major markets with drug safety programs, what kinds of differences might you expect to see? My sense is that given the nature of prices in The US and how much higher drug prices can be relative to other countries, that we might not see as many this the same type of actions by brand manufacturers to ward off subsequent generic entry. And so my sense is that the 25% delay that we observe focusing on US approved small molecule drugs might again be an upper bound relative to what we see in other countries. Other factors that we might want to take into account is this particular study focuses on small molecule drugs.
Speaker 2:And an interesting subsequent analysis would be to think about biosimilars and biologics. And to the extent that biologics are used more often in other countries, or there might be a more developed pathway for biosimilars as there might be in Europe, it would be very interesting to see how the relationship between REMS programs or REMS like program and subsequent biosimilar entry might occur there or generic entry might occur there. And I imagine that the estimates might be somewhat different.
Speaker 1:Just shifting gears a little bit, you, teach at the School of Management at UCLA, and I know, forgive me if I'm overgeneralizing here, but one of your sort of area, areas of expertise is sort of business strategy. And I can see obviously how REMS are business strategy and and how they can be used in that context. And I'm curious if you're standing up in front of your class giving a lecture and you're sort of pointing to this as an example of how a business might approach its sort of five year strategy or its, you know, long term revenue plan. What is it about this story that perhaps might illuminate some kind of more general themes of what you're trying to teach your students about business strategy going forward?
Speaker 2:That's a great question. So one of the lessons that I would take away from this and that I would tell my students is that there might be opportunities within existing regulation. You might view that there might be opportunities with existing regulation, but you want to pursue opportunities that are sustainable in the long run. So what I mean by that is that while it might be in the short term, a opportunity for brand manufacturers to withhold samples from, from generic manufacturers as a way to delay generic entry, that can actually change. So in 02/2019, the CREADS Act was implemented.
Speaker 2:It enacted, and that piece of legislation essentially required brand manufacturers to share samples within a timely manner. It's unclear how well this particular solution is working, but that essentially shifted the opportunities that brand manufacturers had to use withholding as a viable strategy. And so I would encourage my students to think more holistically about their strategies. If they think that there's an opportunity there, think about how legislation might and regulation might change dynamically in response to their actions. So they wanna pursue something that certainly financially attractive, but at the same time is also sustainable for them.
Speaker 1:Great. Okay. Let's shift gears now from kind of the business perspective to the regulator's perspective. From when you described some of the scenarios, or the ways that, brand name manufacturers sort of use these rims as kind of delay tactics, My sense was that, you know, FDA was relatively kind of quiet on the matter. You talked about implementing some guidance recently, but not really having a sense of its impact.
Speaker 1:But there are these certain the kind of common theme of all three of these these sort of techniques is kind of brand name manufacturers being being a little tricky about it, being a little shady. And I'm wondering what role FDA has sort of played in trying to respond to those unintended consequences. And do you have a sense of the current FDA sort of are they engaged on this or is it not a fight they're interested in having?
Speaker 2:This is certainly from my reading an area that where there's active attention being played. So again, as I mentioned, the CREATES Act in 2019 was implemented to address this. The FDA has taken stronger stances in the past. They might do so again in the future. So for example, in the past, instances where brand manufacturers might be challenging the entry of a generic competitor.
Speaker 2:There have been instances where the FDA has denied the brand manufacturer's challenge and referred cases to the FTC as highlighting that this might be an anti competitive action. And so that's maybe something that they might consider doing more so in the future to encourage to as warning of sorts to brand manufacturers and to encourage more collaboration in the future. Other ways in which regulators more holistically might take on a stronger stance is currently surgeons are protected from being sued for using patented medical procedures. That's a protection. In the same way that surgeons are protected, one can argue that perhaps generic manufacturers should be protected from any patent infringement actions related to REMS programs.
Speaker 2:And so there's certainly echoes and practices that have taken place in the past, which one can imagine regulators of different sorts might want to implement in the future to address these issues when it comes to REMS programs and delayed generic entry.
Speaker 1:Before we wrap up, I'm wondering if there's anything else, any sort of highlights or kind of little pieces of your paper research that you might be interested in highlighting for our audience that we haven't gotten to touch on yet today.
Speaker 2:So one of the areas that this paper briefly touched upon and has also been an aspect of other aspects of my research is the importance of transparency. So I mentioned in the past that the FDA issued guidance in 2018 to clarify how brand manufacturers and generic product developers might have more collaboration with each other. And having this information is just incredibly helpful. Increasing transparency between regulators, brand manufacturers, generic product developers can really be a relatively low cost way greasing the wheels of what feels like an opaque process. And I think that's something that we definitely want to take into account.
Speaker 2:Much of my work has thought about transparency and other types of regulation when it comes to drug development for breakthrough therapy drugs or thinking about transparency when it comes to revealing the results of your clinical trials. And so to the extent that this piece of this particular study, this evidence that we have, can add to that conversation about the importance of transparency between regulators, between brand manufacturers and generics is I think something that, is particularly important.
Speaker 1:Great. Well, doctor Jennifer Kao, thank you so much for taking the time to, join us today. Thank you for your work on this paper. To our listeners, that paper is in the, October issue of Health Affairs out now. Check it out.
Speaker 1:And, before we go, a quick shout out to an upcoming event for Health Affairs Insiders on November 5, highlighting, an upcoming, ahead of print article, Health Benefits in 2025 Insights from the KFF Employer Health Benefits Survey, featuring, co author Matthew Ray. Again, Doctor. Kao, thanks so much for joining us.
Speaker 2:Thanks so much for having me.
Speaker 1:To our listeners, if you enjoyed tuning in, please subscribe, recommend it to a friend, and tune in next week. Thanks, everyone. Thanks for listening. If you enjoyed today's episode, I hope you'll tell a friend about a health policy.