Posted by Social Science Research Network
By Michael A. Carrier (Rutgers Law School)
Abstract: Rising drug prices are in the news. By increasing price, drug companies have placed vital, even life-saving, medicines out of the reach of consumers. In a recent development, brand firms have prevented generics even from entering the market. The ruse for this strategy involves risk-management programs known as Risk Evaluation and Mitigation Strategies (“REMS”). Pursuant to legislation enacted in 2007, the FDA requires REMS when a drug’s risks (such as death or injury) outweigh its rewards. Brands have used this regime, intended to bring drugs to the market, to block generic competition. Regulations such as the federal Hatch-Waxman Act and state substitution laws foster widespread generic competition. But these regimes can only be effectuated through generic entry. And that entry can take place only if a generic can use a brand’s sample to show that its product is equivalent.
More than 100 generic firms have complained that they have not been able to access needed samples. One study of 40 drugs subject to restricted access programs found that generics’ inability to enter cost more than $5 billion a year. Brand firms have contended that antitrust law does not compel them to deal with their competitors and have highlighted concerns related to safety and product liability in justifying their refusals. This A…