Using Multiple Authorized Generics to Maintain High Prices: The Example of Entacapone

Area of Science:

• Pharmaceutical economics
• Drug market competition
• Healthcare policy

Background:

• Brand-name drug manufacturers can release authorized generics (AGs), identical products marketed under a generic name.
• Independent generics (IGs) are produced by different manufacturers, typically leading to lower prices.
• The Parkinson's disease drug entacapone's market history provides a case study for analyzing AGs versus IGs.

Purpose of the Study:

• To investigate how authorized generics (AGs) influence brand-name drug exclusivity periods.
• To assess the impact of AGs on the robustness and effectiveness of generic competition.
• To analyze the economic consequences of AGs replacing independent generic (IG) market entry.

Main Methods:

• Utilized public Food and Drug Administration and court records to trace the regulatory and legal history of generic entacapone.
• Analyzed Medicare Part D data from 2011-2020 to estimate trends in entacapone use, prices, and spending.
• Compared actual Medicare spending with projected spending under scenarios of earlier IG competition.

Main Results:

• Multiple AGs were launched by the brand-name manufacturer and IG competitors via settlement agreements before independent generic entacapone entry.
• Medicare prices for entacapone declined by 62% from 2011-2020, less than the projected 74%-92% decline expected with robust IG competition.
• Medicare spent $1.1 billion on entacapone, with an estimated $137-$449 million in potential savings if typical IG competition had occurred.

Conclusions:

• The entacapone case illustrates how licensing multiple AGs instead of fostering IG competition can inflate healthcare spending.
• Government regulators should enhance monitoring of authorized generic strategies to prevent market manipulation and increased costs.
• Policy recommendations include stricter oversight of AGs to ensure fair generic drug market competition.