Economists Praise Sen. Lee’s Drug Cost Reduction Bill

June 14, 2016

WASHINGTON – The International Center for Law and Economics (ICLE), a think tank dedicated to economically-grounded policymaking, praised Sen. Mike Lee’s (R-UT) new CREATES Act Tuesday. The bill would lower the drug costs of millions of Americans by making it easier for generic drugs to reach the market.

The CREATES Act “would mitigate the competitive leverage that brand manufacturers are currently able to exercise under the Food and Drug Administration Amendments Act’s imperfectly drafted REMS provisions,” ICLE executive director Geoffrey Manne said. “Unlike many other legislative fixes, Senator Lee’s bill takes a narrow targeted approach to correcting problems directly, rather than creating a vast new scope of antitrust liability for drug manufacturers,” Manne finished.

The 2007 FDAAA empowered the FDA to demand a Risk Evaluation and Mitigation Strategy (REMS) from a drug manufacturer whenever “new safety information” came to light about one of their existing products. Intended to increase patient safety, some drug companies soon learned they could use REMS to restrict distribution of their brand drugs, including refusing to sell samples to generic drug manufacturers.

Without these samples, generic drug manufacturers cannot comply with the FDA’s existing process for getting generic drugs approved for the market. By delaying the entry of generic drugs into the market, drug companies are then able to charge higher monopoly prices for their drugs for longer periods of time.

While attempts have been made to combat this abuse through use of the antitrust laws, the underlying issue is a regulatory one.‎ The CREATES Act addresses the problem by allowing generic drug companies to sue brand pharmaceutical manufacturers who are refusing to sell them drug samples.

The CREATES Act is cosponsored by Sens. Patrick Leahy (D-VT), Chuck Grassley (R-IA), and Amy Klobuchar (D-MN).