Delayed Generic Drug Entry Cost Medicaid $761M, Study Finds

Medicaid spent an estimated $761 million in excess costs over seven years due to delayed generic drug entry costs, according to a recent study.  

Delayed generic drug entry is common, researchers gleaned from US Patent and Trademark Office (USPTO) data on drugs granted patent term restoration and identified a cohort of drugs that expired between 2010 and 2015. 

Their results recently published in Health Affairs found that, among 69 brand-name drugs, generic drug entry for 20 of the products (29 percent) was delayed by more than one quarter, while delay did not occur for eleven products (16 percent). For 31 products (45 percent), generic entry was delayed by more than one quarter or did not occur at all. 

Generic drug entry delays occurred mostly from patient litigation, the data showed. For 80 percent of the total amount of products, patent litigation was the most common reason associated with delays in generic entry. 

But these delays came at a steep price for Medicaid. The top five drugs of total Medicaid spending contributed to nearly two-thirds of the hundreds of millions in excess costs, the study found.

In particular, generic versions, of paliperidone (Invega), atorvastatin (Lipitor), and olopatadine (Pataday) were delayed for 3.00, 1.75, and 4.50 years, respectively. These drugs were associated with estimated excess Medicaid spending of $126 million, $62 million, and $100 million, respectively, researchers said. 

After accounting for rebates and using market average predictions of brand-name market share and ratios of generic to brand-name prices, researchers estimated that excess spending during the period of delayed market entry was $137 million. 

Researchers highlighted that the study led to policy recommendations.

The patent and regulatory filing information was used to predict expected generic entry. Researchers suggested that these dates could be used to inform regulators and payers of a delay in generic entry and lead to further investigation of the cause. Experts could then proceed with measures to provide necessary patient care.

And because patent litigation can be costly, researchers suggested that USPTO establish better standards when reviewing and issuing drug patents. A review could be required of all new patents when they are filed with the FDA.

“Our findings underscore the financial importance of mitigating delays in generic drug entry and highlight patent litigation as a key contributor to these delays,” researchers stated. 

“Policies that effectively balance incentives for drug development against the public good associated with robust generic drug competition and use should be implemented. In the near term, addressing inefficiencies resulting from patent litigation should be considered, since the costs of delayed generic entry to the US health care system can be substantial.”

Researchers did point out a significant limitation of the study. In the study, biologics, drugs that were converted to over-the-counter (OTC) medications and drugs used in inpatient settings that were not able to be observed in the Medicaid outpatient data set were excluded.  

Omitting data on these drugs suggests that excess Medicaid spending due to delayed generic drug entry is higher, researchers stated. Researchers also did not account for additional spending related to the lack of generics for reformulated or combination products, which have been estimated to be in the hundreds of millions of dollars annually.