Issues

Carve-Outs

GPhA Position

Some brand companies continue to advocate for state "carve-out" legislation to hinder generic substitution. GPhA, of course, is opposed to misguided state initiatives or policies that seek to carve out certain categories of drugs from mandatory generic substitution laws. Efforts to promote carve-out legislation are carried out by, and usually funded by, brand pharmaceutical manufacturers to extend monopolies for drugs whose patents are set to expire. Carve-out laws undermine cost-saving objectives by hindering usage of more affordable medications. There is no scientific or medical evidence to support costly and anti-competitive carve-out legislation. In fact, FDA has stated repeatedly that therapeutically equivalent generic drugs are as safe and effective as their brand counterparts.

Key Points

The term "carve-out" refers to the policy of removing a specific therapeutic class of drugs from standard state generic substitution laws.

In 2008, 80 carve-out bills were introduced in 35 states, each aimed at limiting consumer access to affordable medicines. Only three of these bills passed.

While carve-out strategies were used by brand companies as far back as the late 1980s, the tactic has become increasingly prevalent over the past three years as patents are expiring on numerous blockbuster drugs.

Carve-out laws limit the consumer's right to choose affordable generics, which threatens patient access to these vital medicines. FDA and the American Medical Association (AMA) as well as many other medical and scientific groups have stated that generic substitution is clinically appropriate, effective and, above all, safe.

Carve-out laws also deprive States and taxpayers of billions of dollars in savings that can be achieved by using generics in Medicaid and other state-sponsored drug benefit plans. Illinois estimates its drug carve-out law will amount to $55 million annually in added drug costs; Florida puts it potential cost at $52 million annually.

When doctors write prescriptions they have the ultimate authority to decide whether generic substitution is appropriate and can indicate that decision by merely checking a box on the prescription pad.

Background

More than 69% of Americans who take prescription drugs use FDA-approved generics to improve their lives for less. But as generic utilization has increased, so have the efforts by innovator pharmaceutical companies to preserve monopolies on their name brand drugs, even after drug patents have expired. One primary tactic used by brand manufacturers is to lobby state lawmakers for legislation that would "carve out" entire drug therapeutic categories from state generic substitution laws, despite the overwhelming scientific proof that generics are equally safe and effective as their brand counterparts.

The effects of these anti-consumer, anticompetitive, monopoly-extending carve-out laws are many: limited choice in medicines for consumers; profoundly higher costs to patients, insurers, and government-funded prescription drug programs; increased administrative and financial burdens on physicians and pharmacists; and ultimately poorer health of patients who could not afford their medicines if generics were not available. There are no benefits of carve-out laws, except to pad the bottom lines of the huge brand-name drug manufacturers.

As Congress deliberates over ways to rein in health care costs, it is critical for lawmakers to be aware that no medical evidence exists to support banning the substitution of FDA approved generic equivalents. An article in the December 3, 2008, edition of the Journal of the American Medical Association (JAMA) reported that U.S. scientists reviewing more than 20 years of research and expert opinion on generic versus brand name drugs in the treatment of cardiovascular diseases found no clinical evidence showing brand names were superior to generic versions. The JAMA article made three key points that are appropriate as Congress deliberates over ways to rein in health care costs:

Medical literature demonstrates that generics are the same as their brand counterparts with respect to clinical effects, and thus anecdotal accounts that generic drugs are not as effective or as safe as brands should be discounted;
Policymakers need to let the medical evidence – not brand marketing tactics or biased media stories – guide our actions in setting health care strategies;
Access to lower cost generics can improve patient compliance with their doctor's orders, thereby minimizing potential adverse health outcomes resulting from poor adherence to important medications.

Related Information

Letters

August 3, 2004 - GPhA Letter to the Centers for Medicare and Medicaid Services

Other

February 17, 2009 - Map of Generic Carve-out Legislation 2009 (68.31KB PDF)

January 28, 1998 - FDA Letter to Health Practitioners on Therapeutic Equivalence of Generic Drugs