Misuse of Limited Distribution Networks Prevents Biosimilar Market Entry

Limited distribution networks, which are established when a drug maker contracts with either 1 or a limited number of distributors, can allow a manufacturer to efficiently manage the supply chain for a given product. However, as a recent paper argues, LDNs can have an anticompetitive impact on the marketplace.
Kelly Davio
April 10, 2018
Limited distribution networks (LDNs), which are established when a drug maker contracts with either 1 or a limited number of distributors, can allow a manufacturer to efficiently manage the supply chain for a given product. However, as a recent paper argues, LDNs can have an anticompetitive impact on the marketplace.

Writing in the April issue of The American Journal of Managed Care®, a sister publication of The Center for Biosimilars®, Laura Karas, MD, MPH, and colleagues explain how LDNs have been used to prevent generic and biosimilar companies from accessing samples of drugs that are necessary to perform testing that will support drug applications to the FDA.

Karas and her fellow authors point to a recent experience with Turing Pharmaceuticals, maker of pyrimethamine (Daraprim), an antiparisitic drug whose price was increased from $13.50 per pill to $750.00 per pill under the leadership of then-CEO Martin Shkreli. According to the paper, the director of patient access at Turing commented that he would not have approved a generic drug developer’s attempt to purchase the drug for testing, fearing that competition could undercut the high cost of the product.

The authors explain that the FDA’s Risk Evaluation and Mitigation Strategies (REMS) are often used as a pretext for creating LDNs. REMS programs, despite their stated purpose of ensuring that the benefits of high-risk drugs outweigh potential risks, have come under fire from a variety of stakeholders, including FDA Commissioner Scott Gottlieb, MD, who said that REMS programs “can block the timely entry of a generic competitor” despite the fact that the Food and Drug Administration Amendments Act of 2007 specifies that REMS programs must not be used to delay approval of generic drugs.

While a REMS program may require a product to be sold only to named patients with valid prescriptions, the FDA does not recommend or mandate the use of an LDN as a way to achieve drug safety. However, those manufacturers who elect to contract with a small number of distributors may include in contract terms that the drug only be sold to individual patients, not to generic or biosimilar developers.

According to the FDA’s Janet Woodcock, MD, director of the Center for Drug Evaluation and Research, the agency has fielded more than 150 inquiries from generic and biosimilar companies who say they have had testing samples withheld by brand name drug makers.

Not only can withholding of samples result in costly litigation for companies, it can also have a negative impact on the healthcare system when drug makers raise the price of treatments that have no alternatives available. In addition to pyrimethamine, corticotropin (H.P. Acthar Gel), a systemic corticosteroid approved by the FDA in 1952, has seen a 116,575% increase in price from 2001 to 2018 (from $40 per vial to $46,670 per vial). Similarly, hydroxyl-progesterone caproate (Makena), a synthetic progestin approved first in 1956, saw a 14,900% price increase when it rose to from $10 to $1500 in 2011.

Karas and colleagues suggest 3 potential solutions to the misuse of LDNs:
  • The FDA could require the sale of drug samples for testing; the paper notes this approach as the most likely of the 3 to be effective and points to the FAST Generics Act and the CREATES Act as avenues to achieve this reform.
  • The FDA could determine which drugs may be distributed via LDN. The FDA currently has no authority over which drugs may be placed in LDNs, but the agency could determine that only a subset of REMS drugs warrant limited distribution.
  • The FDA could mandate that drug companies disclose an intention to use an LDN. This approach would not directly impact LDN use, but it could foster increased transparency.
“Misuse of LDNs to deter generic competitors may result in billions of dollars in lost savings each year, so effective legislation addressing this practice could yield tremendous financial benefits,” the authors conclude.

Reference
Karas L, Shermock KM, Proctor C, Socal M, Anderson GF. Limited distribution networks stifle competition in the generic and biosiilar drug industrites. Am J Manag Care. 2018;24(4):e122-e127. ajmc.com/journals/issue/2018/2018-vol24-n4/limited-distribution-networks-stifle-competition-in-the-generic-and-biosimilar-drug-industries.

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