Researchers from three universities have found that extreme price competition in the generic pharmaceutical market — designed to make medications more affordable — may be putting more patients at serious health risk, as evidenced by a higher number of product recalls caused by manufacturing-related problems.
The same research, published online today in the Journal of Operations Management, also raises concerns that generic drug makers may be underreporting discretionary recalls due to competitive pressures.
“Extreme price competition in the generic pharmaceutical market has some unexpected risks that regulators and lawmakers may not have foreseen when pushing for cheaper drugs,” said George Ball, assistant professor of operations and decision technologies at the Indiana University Kelley School of Business and the study’s lead author.
“There’s a downside to cheaper drugs: You can’t guarantee that they’re going to be of the exact same quality,” Ball said. “This research demonstrates that regulators and insurers may want to temper their intense public pressure placed upon pharmaceutical companies to bring prices down. Such pressure may come at a cost: poorly manufactured drugs.”
Other authors of the paper are Rachna Shah, associate professor of supply chain and operations at the University of Minnesota’s Carlson School of Management, and Kaitlin Wowak, assistant professor in the Department of Information, Analytics and Operations at the University of Notre Dame’s Mendoza College of Business.
The researchers assessed the impact of the Drug Price Competition and Patent Term Restoration Act — commonly called the Hatch-Waxman Act — which was intended to increase competition in the pharmaceutical industry and lower drug prices by expediting the approval process for generic drugs. The process has led to a considerable increase in the number of generic drugs entering the marketplace since its passage in 1984.
It’s generally believed that generic drugs are of equivalent quality to the original pioneer drug because they have the same formulation and because generic manufacturers are audited by FDA regulators to the same manufacturing quality standards. But the authors’ study of 939 recalls at 64 firms over a 12-year period found that generic drug companies facing more product competition have more serious Class 1 and 2 manufacturing recalls. These are the recall classes designated by the FDA that may cause death or medically reversible harm to the customer.
While generic drug makers are not allowed to change the design of the product, they have considerable leeway regarding manufacturing decisions.
Read more at Indiana University