Good afternoon and welcome to this hearing of the Subcommittee on Antitrust, Competition Policy, and Consumer Rights. Today’s hearing is entitled, “The CREATES Act: Ending Regulatory Abuse, Protecting Consumers, and Ensuring Drug Price Competition.”
Before I begin, I would like to thank Senators Grassley, Leahy, and Klobuchar, for their support and work on this bill and today’s hearing, as well as their staff, who have worked tirelessly to bring it all together.
The subject of discussion today, the CREATES Act and our attempt to end anticompetitive abuse of FDA safety regulations, is an important one. Nine months ago, when this subcommittee held a hearing on two major health insurance mergers, I noted that, “[w]hile vibrant competition in every industry is important to our economy, consumers and policy makers pay special attention when healthcare is involved.” This is because consumers in this market are not just consumers; they are patients, caregivers, mothers and fathers, making life-changing decisions that impact their personal as well as economic well-being.
Undoubtedly, the most frequent example of rising costs in healthcare is prescription drugs. Nearly everyone has a story about sticker shock at the pharmacy counter, or anger at learning the drug they need isn’t covered by their health insurance, or frustration that no generic version of a drug they depend on has come to market. In response to these concerns Congress in 1984, led by the senior senator from my state, Senator Hatch, passed the Drug Price Competition and Patent Term Restoration Act, known as the Hatch-Waxman Act, to facilitate and encourage increased entry of lower-cost generic pharmaceuticals. The result has been a drastic increase in generic entry and billions of dollars in savings to consumers and tax-payers.
Yet increased competition doesn’t always sit well with incumbents. And unfortunately, complex regulatory environments are often rife with opportunities for manipulation and abuse to avoid competition. This is exactly what has happened with certain prescription drugs.
When Congress passed the FDA Amendments Act in 2007, one of the things it intended to do was to provide the FDA authority to ensure certain dangerous drugs were handled safely and responsibly in order to protect patients and prevent misuse. To do so, it created the Risk Evaluation and Mitigation Strategy program, or REMS. A REMS program can take many forms, but one element it may include is restricted distribution. In these situations, a drug is not sold through the normal supply chain, going to third-party wholesalers who sell it to pharmacies and hospitals. Instead, the drug is distributed directly by the manufacturer or through a specialty pharmacy that only sells to patients with a prescription.
Some companies realized they could take advantage of this situation. When they have a drug subject to a REMS with restricted distribution, they can use it as an excuse to deny samples of the drug to potential generic competitors--samples that are necessary for the generic to conduct the testing required by the FDA under the Hatch-Waxman Act, the Act whose entire purpose was to increase generic entry.
The CREATES Act, which stands for Creating and Restoring Equal Access to Equivalent Samples, aims to end this abuse by providing two causes of actions by which generic competitors can get access to samples and ensure they are not excluded from a REMS program. While some parties have attempted to use the antitrust laws to address this conduct, I believe it is better characterized as a competition policy problem stemming from a regulatory misuse of government regulation. In these situations, the answer is not to pile antitrust enforcement on top of regulation, but to fix the underlying problem: the law itself. I believe the CREATES Act does just that and am hopeful that it will become law and lead to increased competition and lower prices for consumers.
Again, I thank Senators Grassley, Leahy, and Klobuchar for their leadership on this issue and support for this bill, and I look forward to hearing from our esteemed panel of witnesses.