This working paper was prepared for "Reining in prescription drug prices," a May 2 event presented by the Center for Health Policy and the Hutchins Center on Fiscal and Monetary Policy at Brookings.
While most generic drugs remain an inexpensive and critical part of a physician’s therapeutic arsenal, these cases reveal failures in the generic drug market that can lead to substantial patient harm.
In response, we propose a sustainable strategy to address price spikes among U.S. generic drugs and improve patients’ access to safe medicines. We begin by outlining the important role of generic medicines in the U.S. health system and the market failures that have contributed to recent price hikes and shortages. Next, we consider the various strategies that have been proposed to address those market failures and the reasons that those strategies are likely to fall short in fixing the problem. Third, we propose a three-pronged approach for increasing competition in the U.S. generic drug market, while minimizing any attendant risks to patient safety or undermining the institutional role of the FDA. This proposal centers on the use of reciprocal drug approval and draws on previous precedents and the existing platforms for regulatory cooperation in the pharmaceutical sector. Last, we apply our proposal to show how it might affect international competition among a cohort of U.S. drugs currently eligible for generic competition, but lacking sufficient competition to achieve substantial price reductions.
Kesselheim’s research is supported by the Laura and John Arnold Foundation, with additional support from the Engelberg Foundation and the Harvard Program in Therapeutic Studies. Bollyky did not receive financial support from any firm or person for this article. He is currently not an officer, director, or board member of any organization with an interest in this article.
 Gretchen Morgenson. 16 Apr 2017. “Same Pills, Higher Cost.” New York Times, BU1