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Monday, 25 March 2013 10:57

Because Big Pharma Pays Off Generic Drug Companies, Americans Spend Billions of Dollars More for Prescriptions

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pillsfinalNational Public Radio reports it succinctly:

The U.S. Supreme Court hears arguments Monday in a case worth billions of dollars to pharmaceutical companies and American consumers. The issue is whether brand-name drug manufacturers may pay generic drug manufacturers to keep generics off the market. These payments — a form of settlement in patent litigation — began to blossom about a decade ago when the courts, for the first time, appeared to bless them.

The White House is siding with consumers on this one.  According to the Associated Press (AP):

The Obama administration, backed by consumer groups and the American Medical Association, says these so-called “pay for delay” deals profit the drug companies but harm consumers by adding 3.5 billion annually to their drug bills….

The Obama administration argues the agreements are illegal if they’re based solely on keeping the generic drug off the market. Solicitor General Donald Verrilli, speaking at Georgetown Law School recently, noted that once a generic drug gets on the market and competes with a brand-name drug, “the price drops 85 percent.” That quickly decimates sales of the brand-name medicine.

The specific case before the Supreme Court is illustrative of how consumers get the bill for pay-offs to generic drug companies, as state in a Washington Post editorial:

In 2006 Solvay Pharmaceuticals, the maker of the testosterone-therapy drug AndroGel, settled a dispute with a group of generic pharmaceutical companies, agreeing to allow would-be competitors into the market in 2015, five years before the AndroGel patent expires. So how is this bad for consumers in search of cheaper drugs?

In fact, the Federal Trade Commission (FTC) will argue Monday before the Supreme Court that this settlement and all others like it are so obviously anti-competitive that they should be presumed illegal. And the FTC has a very good case.

The reason lies in the fact that the generic pharmaceutical companies also agreed to take millions in cash from Solvay as part of the settlement. That arrangement, the FTC argues, stinks of illegal collusion — without which generic versions of the drug might have entered the market even earlier…..

If companies can effectively maintain monopoly pricing for a while longer and split up the profits by way of legal settlements, generics firms are less likely to push for competition to begin at the earliest possible date. Both sides make money in the interim, but consumers pay the price. It’s hard to think of a circumstance in which that sort of dealmaking wouldn’t indicate a violation of the spirit of the nation’s antitrust laws.

The logical question, of course, is why would Big Pharma pay off generic drug makers to drop a patent challenge in court if there wasn't a concern that the big name pharmaceutical firm might lose the case, resulting in far, far less costly generics becoming available in pharmacies?

What is the impact of the "pay for delay" scheme? As the Associated Press reports, when the Pfizer Lipitor cholesterol drug expired, "The price then plummeted from Pfizer’s $375 to $530 for a three-month supply, depending on dosage, to $20 to $40 for generic versions."  

Did you just feel the elevator drop ten floors? Because that's what happened when generic versions of Lipitor became available: the price to the consumer was reduced by more than ten-fold.

Big Pharma trots out the usual arguments that if it doesn't pay generic drug companies not to pursue patent lawsuits, the brand name pharmaceutical firms will not recapture their funds spent on research.  

However, according to a 2012 article in the UK Independent:

The multi-billion pound pharmaceutical industry has spent the last decade developing new drugs which have produced little benefit and caused considerable harm, experts say today.

The claim that there is an "innovation crisis" in pharmaceuticals because of the difficulty and expense of discovering new drugs is a myth fostered by an industry whose chief focus is on marketing, they add.

Counter to drug industry claims that the pipeline of new drugs is running dry, the number of new drugs being licensed each year has remained at between 15 and 25. But most involve minor tweaks to existing drugs, designed to grab a slice of an existing market rather than offering genuine therapeutic innovation.

Independent reviews suggest that 85 to 90 per cent provide little benefit over existing treatments with some, such as Vioxx the painkiller and Avandia, the diabetes drug, causing serious side effects which led to their withdrawal, the latter's in Europe.

Writing in the British Medical Journal, Professor Donald Light from the University of Medicine of New Jersey and Joel Lexchin from York University in Toronto say the situation has remained the same for 50 years. The incentives for drug development are wrong and have skewed the behavior of the industry.

"This is the real innovation crisis: pharmaceutical research and development turns out mostly minor variations on existing drugs and most new drugs are not superior on clinical measures. [They] have also produced an epidemic of serious adverse reactions that have added to national healthcare costs," they say.

More is spent on marketing (25 per cent of revenues) than on discovering new molecules (1.3 per cent).

Then there's Medicare Part D, which the Bush administration got passed to benefit Big Pharma, and according at a 2006 analysis by Congressman Henry Waxman (D-California) increased pharmaceutical profits by $8 billion in the first six months of the program alone. Bush gave a gift to Big Pharma lobbyists of not allowing the federal government to negotiate the price of drugs, thus increasing the financial costs of Medicare as a program by billions and billions of dollars over the years.

The pay for delay scheme is a boon to pharmaceutical firm corporate profits, not a boon to health.  If anything, it’s a court-sanctioned gouging of consumers in medical need – to the tune of billions of dollars a year.

That's a hard pill to swallow – and an expensive one.

(Photo: Erix!)