Sen. Elizabeth Warren, D-Mass., and Rep. Jan Schakowsky, D-Ill., want to give the U.S. government the power to make certain generic medicines in cases where manufacturers have a monopoly and have significantly increased their prices, putting those products out of the reach of many Americans.

Warren's and Schakowsky's Affordable Drug Manufacturing Act is an attempt to avoid situations like when Turing Pharmaceuticals LLC in 2015 raised by more than 5000% the price of its toxoplasmosis drug Daraprim — a medicine that is more than 60 years old but lacked generic competition.

The legislation is also aimed at stopping the gaming tactics used by brand-name drugmakers to impede generic competition as well as generic price-fixing behavior.

In a Dec. 17 letter to the incoming heads of the Senate health, finance and judiciary committees, Warren called for new investigations and hearings on allegations of generic company price fixing.

In their bill, Warren and Schakowsky are calling for Congress to establish an Office of Drug Manufacturing within the Department of Health and Human Services to make select generic drugs and offer them to consumers "at a fair price that guarantees affordable patient access," the lawmakers said in a statement.

The two lawmakers specifically want the government to be able to make lower-cost versions of insulin, a product that has been around for more than 100 years and is essential for diabetes patients but whose prices have substantially increased in recent years.

"In market after market, competition is dying as a handful of giant companies spend millions to rig the rules, insulate themselves from accountability, and line their pockets at the expense of American families," Warren stated.

The Massachusetts senator said the legislation is not intended to replace the generic market but to fix it by introducing more competition in the hopes such a move could bring down drug prices.

The system in which market forces are supposed to kick in when patents on brand-name drugs expire "is broken in fundamental ways," Warren and Schakowsky said.

About 90% of the prescription medicines taken by Americans are generic drugs. But 40% of the generic medicines sold in the U.S. are made by a single company, with the majority manufactured by only a few drugmakers, the two lawmakers noted.

In some cases, there are no generic drugs available for patients in the U.S. long after a brand-name medicine's patents have expired.

But in other instances, as with Daraprim, companies buy up old drugs that have no generic competition "to corner the market and jack up prices, all to rake in cash on the backs of patients," Warren and Schakowsky said.

Trump's solutions

The Trump administration's solution to that problem is to allow limited imports of prescription medicines from foreign countries in cases where a company is the sole manufacturer of an old drug that has had its price hiked dramatically, though it is unclear if U.S. Food and Drug Administration Commissioner Scott Gottlieb is fully on board with the idea.

Gottlieb has long held that importation would not work to bring drug prices down. But he was ordered earlier this year by his boss, HHS Secretary Alex Azar — who had previously and repeatedly called drug importation a gimmick — to explore the matter.

The FDA chief formed a working group, which has been outlining a plan of action, though no details have been disclosed.

Gottlieb has called on brand-name drugmakers to stop the shenanigans and has taken steps to stop those companies from using gaming tactics to forestall competition, including making it easier for generic drug manufacturers to create their own risk programs.

The FDA also recently took new steps to incentivize drugmakers to develop lower-cost versions of insulin.

The Warren-Schakowsky bill

The Warren-Schakowsky legislation is among a string of bills recently introduced on Capitol Hill aimed at reining in drug prices, including measures from Sen. Bernie Sanders, I-Vt., and a group of four Democrats: Richard Blumenthal of Connecticut, Kamala Harris of California, Jeff Merkley of Oregon and Amy Klobuchar of Minnesota.

Under Warren's and Schakowsky's legislation, the proposed Office of Drug Manufacturing would be authorized to make a generic drug when no company was manufacturing and selling the product in the U.S. The office also could make a generic medicine when only one or two drugmakers were producing the product and the price had spiked, becoming a barrier to patient access, or when it is in shortage.

The government manufacturing entity also could make a generic version of a medicine when only a few companies are making a product that is listed as an "essential medicine" by the World Health Organization.

The legislation would authorize the office to manufacture any drug that has been compulsorily licensed by the federal government.

Under the bill, the Office of Drug Manufacturing would be required to begin production of lower-cost versions of insulin within one year of enactment.

The government office also would be permitted to manufacture active pharmaceutical ingredients — the key chemical component in small-molecule medicines.

Any revenue generated from the sale of publicly manufactured drugs would be reserved to run the office, making it self-sustaining, Warren and Schakowsky said.

They said their bill had already gained the endorsements of several patient and consumer organizations, including Public Citizen, the National Physician's Alliance, AIDS Healthcare Foundation and the American Federation of Teachers.

Opposition

But the Association for Accessible Medicines, a lobbying group that represents generic manufacturers, called the Warren-Schakowsky bill an "unrealistic distraction from policies that would meaningfully reduce drug prices."

The group said the legislation "misdiagnoses the disease."

"When generics provide Americans with 9 out of 10 of their prescriptions at only 23% of total spending on drugs, it is hard to fathom why anyone would call this system broken or insist that the government commandeer the business of developing, manufacturing, and distributing these medicines," a spokesperson for the group told S&P Global Market Intelligence.