Study finds that drug labelling change may add $4bn to US health care costs

6 February 2014 (Last Updated February 6th, 2014 18:30)

The Food and Drug Administration's (FDA) recently proposed regulation affecting generic drug labelling may result in an estimated $4bn in additional US health care costs a year, according to an analysis by economic consulting firm Matrix Global Advisors (MGA).

The Food and Drug Administration's (FDA) recently proposed regulation affecting generic drug labelling may result in an estimated $4bn in additional US health care costs a year, according to an analysis by economic consulting firm Matrix Global Advisors (MGA).

Once implemented, the labelling regulation will allow generic drug producers to make changes to their labels, which they are not currently allowed to do.

The MGA study found that the rule would leave generic drug makers open to product liability lawsuits and force them to overwarn about side effects in their labels to protect themselves from any litigation.

The firm found that the added generic product liability would raise annual spending on drugs by $1.16 per prescription for the 3.4 billion generic prescriptions that are dispensed in the country annually.

MGA CEO Alex Brill said that the FDA's proposed rule would increase insurance premiums, self-insurance costs and product liability spending, forcing generic drug producers to raise prices.

"The Proposed Rule would add significant costs to the US health care system by raising the cost of generic drugs. These additional costs will ultimately be borne by patients," Brill added.

"Generic manufacturers also may exit or decline to enter the market for products with greater liability risk."

MGA is engaged in consulting and analysis on a range of health care, tax, and other policy matters.