Examining cost effects of ‘skinny-label’ generics

A federal ruling over a patent dispute could lead to long-term effects on health care spending in the United States, a recent study indicated.

At issue is a common practice known as “skinny labeling.” Manufacturers of brand-name drugs can and often do patent them for additional indications that then extend the patent term. To prevent these extensions from causing prolonged delays in developing generic competition, federal law allows the FDA to approve generics for the indications that are no longer patent-protected, resulting in a so-called “skinny label.”

One example of a skinny-label drug is a generic version of carvedilol, manufactured by Teva, which was approved in 2007 for hypertension and left ventricular dysfunction after myocardial infarction. The brand-name drug, Coreg, manufactured by GlaxoSmithKline, included an additional indication for heart failure that remained under patent. In August 2021, a federal appeals court ruled that Teva had infringed on the patent of GlaxoSmithKline because of the way it had labeled and marketed its generic product.

“The concern around this case is that it might lead other generic drugmakers to be more hesitant to launch generic drugs,” said Benjamin N. Rome, MD, MPH. “We know that generic drugs are a major source of savings in the United States.”

To determine the potential long-term consequences, Dr. Rome and his colleagues at the Program On Regulation, Therapeutics, and Law (PORTAL) at Brigham and Women's Hospital and Harvard Medical School wanted to estimate how much Medicare Part D has saved through competition from skinny-label generics. They identified 15 brand-name drugs for which a skinny-label generic first came to market from 2015 to 2019, then measured usage and costs in the period of competition attributable to skinny labeling before a full-label generic was approved. The results were published as a brief research report in the June Annals of Internal Medicine.

From 2015 to 2021, generic versions of the 15 study drugs accounted for a median of 66% of dosage units dispensed, and actual use of drugs that had skinny-label generics was a median of 13.5% higher than projected use without such competition. Medicare spent $16.8 billion on the 15 study drugs and their skinny-label generics, but that would have been $31.5 billion without generic competition, the researchers found, estimating that skinny-label generics had saved Medicare approximately $14.6 billion.

“The federal appeals court ruling involving carvedilol has increased the risk for liability for skinny-label generic manufacturers; our analysis suggests that deterring the use of skinny labeling could be costly,” they wrote.

To learn more, I.M. Matters from ACP spoke to Dr. Rome, a general internal medicine physician and health policy researcher at Harvard Medical School and a faculty member in the division of pharmacology and pharmacoeconomics in the department of medicine at Brigham and Women's Hospital in Boston.

Q: Have skinny-label generics ever been challenged before, or was this something new?

A: I think the specific legal threats to skinny labeling are relatively new. It's been long recognized that this was a pathway that generic drugmakers used to enter the market without waiting for some of the final patents to expire on a branded drug that might otherwise prevent them. But this has been the biggest legal threat where a generic company has been found to have done something wrong under that pathway, and the marketing strategies they were using were pretty routine, so it makes other generic companies wonder what they might face in terms of legal liability if they launched skinny-label generics as well.

Q: Did anything about your findings surprise you?

A: I don't think this was particularly surprising. We were looking at a group of 15 drugs that we'd looked at in a previous study, and these are drugs where the first generic that came to market was skinny labeled. We found that on average, those skinny-label generics hit the market two and a half years before generic competition might otherwise have begun during our study window. We found that once these generics entered the market, prices fell by quite a bit. When we projected out what the prices and spending would have been in the absence of generic competition, it was quite a bit higher, particularly for some blockbuster medications like rosuvastatin or pregabalin or imatinib. … We know, from decades of experience, that prices tend to fall by up to 80% once generics come onto the market. Our findings were relatively aligned with that.

Q: If a skinny-label drug is used for a brand-name indication, is that considered off-label use?

A: Technically speaking, yes. We've previously done research showing, and I think this is commonly known, that generics get used in place of the brand-name drug for both the indications that are on the generic label and those that are carved out from the skinny label. That's in large part because I don't think a lot of doctors and patients pay attention to the specific FDA labeling of their generic drug, nor the pharmacists, to notice that the generic is actually not approved for the patient's indication. Once the generic is deemed interchangeable with the brand-name drug, pharmacists and patients and doctors just treat them as substitutable.

I'm a practicing primary care doctor, and I do not look at generic drug labels before I prescribe the medicines. We know what different medicines are used for, and in fact, in all states, pharmacists can substitute generics in place of a brand-name prescription, so even if I did prescribe the brand-name version of the drug, the pharmacist may substitute the generic in its place. That's been common practice in the United States for decades as a kind of well-accepted way to save money by promoting the use of less expensive generic medicines.

Q: What are some implications of this research?

A: This research highlights the importance of skinny labeling for bringing generics to market quickly and helping bring down prices of medications so that they can be affordable to patients. I do think that based on what we've seen in the courts, it would make sense for policymakers to step in and strengthen the skinny-label pathway. For example, they could just explicitly protect generic companies that engage in this pathway from legal liability like what was faced in the recent lawsuit. And perhaps the FDA could step in and clarify what sort of marketing is appropriate for skinny-label generics, and that can help the courts differentiate between what is OK and common practice and what is explicitly not OK.

But again, the reality is that without this pathway, drug companies can get patents on indications for their drugs that could indefinitely extend the market exclusivity period and prevent generics from coming to the market. That could be a strategy companies could use if this pathway didn't exist. That is not a good option, given how effective generics are at lowering costs.

Generic competition is the predominant way we control drug spending in this country. Generics account for about 90% of prescriptions, and only about 10% of spending in the United States is on prescription drugs. Generics are an essential tool for keeping drug costs down; they've been remarkably successful at introducing competition that lowers costs, and it's really only the drugs that don't yet have generics that are driving most of the spending in the United States.

Q: What do you think is next for skinny-label generics? What should physicians and policymakers be watching for?

A: I'm not a lawyer, but I think the problem is, unfortunately, the Supreme Court had a chance to overrule this case and decided not to take it up, so we are somewhat stuck with this ruling. I do think that it would make sense for policymakers in Congress, in particular, to step in and strengthen this pathway. That could be done as part of routine bills that pass to fund the FDA. I don't think it's politically unfeasible for this to be fixed.

In terms of what to watch out for, researchers like us, and folks who watch these markets carefully, are going to have to pay close attention to see if we see slower generic competition resulting from this court case that makes it less palatable for the generic companies to pursue the skinny-label pathway. It'll be important to measure that effect, if one exists. Our research suggests that it could be extremely costly if that's the case.