By Michael S. Sinha, Edna Besic, and Melissa Mann
Members of Congress have been focused on drug pricing for the last several years, culminating recently in new drug pricing provisions within the Inflation Reduction Act of 2022. One reason for our drug pricing problem is that we allow manufacturers to charge whatever the market will bear for a new therapeutic. However, as we have also seen, manufacturers often engage in anticompetitive “games” aimed at extending market exclusivity and forestalling generic competition. One of these games is product hopping.
An integral part of product life cycle management strategies for pharmaceutical corporations, product hops are reformulated versions of an often-lucrative brand-name drug, aimed at preserving market share after generics enter the marketplace. Regulatory and patent exclusivity periods govern the timing of generic entry, and because market share and revenue is often quickly lost upon market entry of generic drugs, extending market exclusivity for any duration can be extremely profitable. When a manufacturer develops and launches a new formulation, like an extended-release version, of its profitable drug, it can capture market share from generics. This, as Michael Carrier and Steve Shadowen note, “can significantly decrease consumer welfare, impairing competition from generic drugs to an extent that greatly exceeds any gains from the ‘improved’ branded product.” As such, product hopping is generally viewed as problematic.
Yet Dmitry Karshtedt held otherwise at the ASLME Health Law Professor’s Conference in Atlanta, GA in 2017. On a panel together, we each presented on topics relating to product hopping, but from very different perspectives. My talk was titled “Legal Approaches to Ensuring Timely Generic Drug Availability.” Dmitry’s talk, “Evergreening: The FDA’s Role in the Creation of Balanced Rights for Pharmaceutical Improvements,” was developed into an article and published in the Iowa Law Review in 2019 titled “The More Things Change: Improvement Patents, Drug Modifications, and the FDA.” Dmitry and I would have several conversations on the topic over the years, and we eventually began a short paper project on the topic that will remain unpublished. My latest article, Public Health Product Hops (forthcoming 2023, American University Law Review, available on SSRN), represented my long-form attempt to reconcile our differing opinions on product hopping. The first draft was completed about a week before Dmitry’s death, and it was workshopped for the first time with Professor I. Glenn Cohen’s Health Law Policy, Bioethics, and Biotechnology Workshop at HLS.
The original premise of the paper was this: if I were to accept Dmitry’s premise that some product hops are good, I would need to identify circumstances for which allowing a product hop resulted in a net benefit to society that exceeded the excess costs associated with the new product. A few test cases came to mind as potential fits: (1) removal of chlorofluorocarbons (CFCs) from respiratory inhalers; and (2) switches to abuse-deterrent formulations (ADFs) of opioids. In each scenario, public health considerations drove the product switches and the FDA actively encouraged the development of reformulated products. In fact, the FDA continues to encourage the development of ADFs for opioids while exploring the development for ADFs of CNS stimulants. My paper came a long way since its debut in Boston last November, but that is largely because each of these test cases failed miserably.
There were significant costs associated with these two switches – billions of dollars in profits and a wildly disrupted respiratory inhaler market in the first instance, and switches that produced limited benefit but increased overdose and increased incidence of bloodborne infectious diseases in the other. It turned out that both categories of product hops were largely driven by the industry and can be traced back to profit-driven efforts to extend market exclusivity of lucrative products under the auspices of public health. But perhaps other forms of public health benefit would outweigh these harms?
A recent test case came to mind that seemed a more plausible fit: over-the-counter intranasal naloxone, the drug that can reverse toxic effects of opioids, including overdose. Some manufacturers will switch their products from prescription to over-the-counter (still a product hop) if the products have strong safety profiles and if the manufacturer believes consumer choice will continue to drive brand-name revenue. This is true for several categories of medications found on pharmacy shelves, such as analgesics, H2- and proton-pump inhibitors, and antihistamines. But what would it take to induce an over-the-counter product hop for a product like naloxone, that has an essential public health use, in order to increase its availability? Indeed, advocates have been calling for OTC naloxone access for years, but the FDA only recently allowed the switch. Could Congress or the FDA have incentivized the manufacturer to initiate the switch much sooner?
Given that over 700,000 people in the United States died from opioid overdoses from 1999 to 2017, if the OTC naloxone switch makes the lifesaving overdose reversal drug more accessible and affordable, the societal cost of the product hop may be offset by the benefit of overdoses reversed and lives saved. It therefore became the first public health product hop scenario that squared nicely with Dmitry’s premise. Though he and I agreed that incremental changes from product hops usually offered some tangible benefit to patients – like an improved dosing regimen or a reduced pill burden – we disagreed as to whether or not the rewards for such “new” products were outsized. My article offers a compromise: a time-limited opportunity to introduce one new formulation to the market within the first few years of market exclusivity, but a time-bar for future applications unless exceptional circumstances warrant it. That way, we do not lose out on the “improvement patents” and “drug modifications” that Dmitry wrote about, but we also limit the extent to which those products can increase health care spending and impede generic entry down the line.
Professor Sinha is Assistant Professor of Law in the Center for Health Law Studies at Saint Louis University School of Law (SLU LAW).
Edna is a second-year law student at SLU LAW concentrating in health law and intellectual property.
Melissa is a second-year law student at SLU LAW concentrating in health law.