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Competition From Skinny-Label Generics Saved Medicare Nearly $15B Over 5 Years

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A new court ruling has the future use of skinny labels in question, but skinny-label generics have saved Medicare a lot of money over 5 years.

Skinny labels, which carve out patent-protected indications from generics, have generated nearly $15 billion in Medicare savings from 2015 to 2020, and a new court decision could deter the use of skinny labeling, explained a letter published in Annals of Internal Medicine.1

The use of skinny labels has allowed generic competition to come to market sooner. While pharmaceutical companies will employ tactics such as patent thickets to protect the drug’s active ingredient to prevent generic competition, the FDA will approve generic formulations for those indications no longer covered by the patent.2 As a result, a generic version of a drug may be on market but not include an approved indication that is still covered by a patent.

Previous research has shown that 43% of drugs will have generic versions with a skinny label.2 However, a recent court case may discourage the use of skinny labels and lead to a delay in generic competition, the authors noted.

Stethoscope with judges gavel | Image credit: yavdat - stock.adobe.com

There are concerns that the court ruling against Teva's skinny-label generic drug could discourage the marketing of skinny-label generics, which have saved Medicare Part B nearly $15 billion over 5 years.

Image credit: yavdat - stock.adobe.com

GlaxoSmithKline (GSK) sued Teva for its marketing of carvedilol (Coreg), a β-blocker. The argument was that Teva was inducing physicians to prescribe the drug for carved out indications still under patent protection, thus infringing on the patents.3 The US Supreme Court declined to hear Teva’s challenge to the $235 million award it owed GSK.4

Skinny-label generics of carvedilol are allowed to have indications for hypertension and myocardial infarction, but the heart failure indication was still protected by a patent. The Federal Circuit sided with GSK that Teva’s label and marketing materials encouraged doctors to prescribe the skinny-label generic in a way that infringed on the patented indication.4

In this study, the researchers identified 15 brand-name drugs with a skinny-label generic that first came to market between 2015 and 2019. They focused only on small-molecule drugs and calculated savings from the date the skinny-label generic was first marketed until the FDA approved a full-label generic with no carve outs due to patents or until the end of the study period, December 31, 2021.

The actual spending on brand-name drugs using Medicare Part D Drug Spending Dashboards from 2015 to 2021 was compared with the project spending if no skinny-label generic had been introduced.

Overall, skinny-label generics coming to market led to a median (IQR) of 2.5 (1.4-3.2) years of earlier generic competition during the timeframe. In the final year of skinny-label generic competition, average prices were a median of 34% (14%-44%) lower than in the year before competition.

The projected Medicare spending on these 15 drugs without skinny-label generic competition was $31.5 billion, which was reduced down to an estimated $16.8 billion in reality through the use of skinny-label generics. Overall, Medicare saved an estimated $14.6 billion over 5 years.

Of the 15 drugs analyzed, the greatest savings were seen with rosuvastatin (Crestor, AstraZeneca), with Medicare Part D saving $6.5 million from skinny-label generic competition.

The authors noted that the uncertainty around projected prices and use of medications without the availability of skinny-label generics was one limitation of the study, as well as the lack of documentation around rebate estimates. In addition, they held the prices of brand-name drugs constant, which means savings would be greater if the introduction of a skinny-label generic resulted in lower prices for the brand-name product.

“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,” the authors concluded.

References

1. Egilman AC, Kesselheim AS, Sarpatwari A, Rome BN. Estimated Medicare Part D savings from generic drugs with a skinny label. Ann Intern Med. Published online April 29, 2024. doi:10.7326/M23-3212

2. Walsh BS, Sarpatwari A, Rome BN, Kesselheim AS. Frequency of first generic drug approvals with “skinny labels” in the United States. JAMA Intern Med. 2021;181(7):995-997.

doi:10.1001/jamainternmed.2021.0484

3. GlaxoSmithKline LLC v Teva Pharmaceuticals USA, Inc, 2021 US App Lexis 23173 (Fed Cir 2021).

4. Brittain B. US Supreme Court rejects Teva challenge to $235 million GSK award in patent dispute. Reuters. May 15, 2023. Accessed April 29, 2024. https://www.reuters.com/legal/us-supreme-court-rejects-teva-challenge-235-million-gsk-award-patent-dispute-2023-05-15/

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