Re: the one thing i will back pelosi all the way on.....
[QUOTE=subterFUSE;433665]My dad specializes in getting drugs approved by the FDA, primarily.
Looking forward to further discussion. ;)[/QUOTE]
OK, a few thoughts here on pharmaceutical pricing.
First off, much of your argument seems to presuppose that generic drugs are bad. For the pioneer drug manufacturer's standpoint, that's certainly right, but from a consumer's standpoint, nothing could be further from the truth. Think about it in practical terms -- you go to the pharmacy to fill a script, and if there is a generic available, there is a remarkable difference in what you pay.
BTW, for a generic version of a drug to be substituted by the pharmacy, it has to be what is known as AB-rated, meaning that it is bioequivalent, i.e., it has the same safety and efficacy profile as the referenced drug. This does not mean that it is identical -- they will typically have the same active ingredient (because you can't patent a chemical compound) and will have different inactive ingredients -- but it will work in the same way. They probably won't be the same color as the branded drug, might be bigger, might be smaller, might not be scored, might not be compressed in the same manner, but it has to work the same as the original for it to be substituted. In terms of effectiveness and safety -- which is really what counts -- they are the same, and referring to a generic as a cheap knockoff might make sense from the standpoint of a competing branded drug manufacturer that wants consumers to have a reason to stay with the drug, but the reality is that from the standpoint of a consumer, there is rarely a difference, and if there really is a difference, a physician can write a script as "dispense as written" which disallows generic substitution.
The other thing to remember is that making a generic version of a drug is not as easy as just going into the lab and whipping it up. Generic drug companies work extremely hard to reverse-engineer the drugs in terms of safety and efficacy and then re-engineer them to work around the patent. Back in 1983, Orrin Hatch and Henry Waxman co-sponsored a bill that would allow for the entry of generic drugs to encourage companies to come to market with competing generic versions of branded drugs. If a company can manufacture a generic version of a drug that does not infringe on the patent of the branded drug (or if it can demonstrate that the underlying patent is invalid), it is awarded with 6 months of exclusivity where it is the only drug company that can sell a generic version of the drug, and no other drug company can begin selling another generic until that 6 months have run.
You might think, "6 months, big fucking deal." Well, it is a big fucking deal, both to the branded manufacturer and the generic manufacturer. A great example of this is the antibiotic ciprofloxacin a/k/a Cipro which gained great notoriety after 9/11 because it is what is administered to someone who has been exposed to anthrax. Cipro is the best selling antibiotic on the planet and has annual sales in excess of $1 billion. Let me say that again, because it bears repeating -- every year Cipro is on the market without generic competition, Bayer brings in $1 billion. That's $830 million [B]per month[/B].
You might remember after 9/11 that there was a great deal of press about there not being a generic version of Cipro available, and Bayer being vehemently opposing any attempt to allow a generic into the market. The reality, however, is that there have been generics locked and loaded for Cipro since at least 1997 -- Bayer, however, paid the would-be competitor to stay off the market, and consumers paid the price.
It works like this -- when a generic competitor certifies that its drug will not infringe the branded drug's patent, the branded manufacturer has an automatic right to sue for patent infringement and stay the entry of the generic competitor for 30 months. This invariably happens whether the infringement suit has any merit or not because 30 months without competition equals enormous amounts of money -- using Bayer as an example, when it sued its would-be competitor, it protected its stream of $2.5 billion over the next 2 and a half years.
On the even of trial, Bayer entered into a settlement agreement where it paid the alleged infringer $100 million up front and $25 million per year to refrain from coming to market -- and because that would-be competitor didn't enter the market, its 6 months of exclusivity never began to run, and no other generics could come to market, either. Bayer preserves its monopoly, the generic manufacturer makes more than it could on the open market, and consumers are hung out to dry.
It would be great if this was an isolated example. Unfortunately, this sort of thing happens routinely when drugs are coming off patent or generic competition is imminent. My favorite was when a drug company, on the eve of its patent expiration, filed a patent covering the substance the body creates when metabolizing the drug to stretch its monopoly another couple of decades. Even though the patent was ultimately denied, they went a few months without competition while the dispute was ongoing, and that's what's really important. This is the landscape in which these companies compete.
You are correct that when generics come to market, the effect on the branded drug's market share is significant. Within 1 year, generics normally take approximately 80% of the market share. What about those 20% that stay with the branded drug? Do they pay less because of the presence of competition? You'd think so, but you'd be wrong. Through something known as "market harvesting," the prices of branded drugs actually increase after generic entry to try to make as much money off the loyalty of those that stick with the brand rather than switching to the generic.
Anyway, the point is this: pharma companies do good for society, and they should be rewarded for that and allowed to make money, even a lot of money. The question is when enough is enough. R&D is a huge expense, but it is an expense that drug companies have, for years, willingly taken on in exchange for the promise of ridiculous profits. Nowadays, however, that expense is being eclipsed by marketing-related expenses.
Blockbuster allergy drug Claritin is a good example to use here. Claritin is an example of a drug where the marketing cost more than the development -- over $1 billion in marketing. Something a lot of people don't know, however, is that Claritin, as a drug, really isn't all that effective. Its manufacturer's own studies, the results of which are publicly available to anyone willing to dig, shows that it is only slightly more effective than a placebo. Nevertheless, Schering marketed the hell out of it and people pop it like candy. At least they did, until it was getting ready to come off patent and go OTC. At that point, Schering began cannibalizing its own market for Claritin by pushing Clarinex, a drug that is chemically and clinically almost identical to Claritin but which fetches the higher branded prescription price. Pretty smart, I suppose, but most consumers who take Clarinex don't know that (1) there's almost a 50/50 chance that it won't do shit for you, and (2) even if it does work, it is virtually indistinguishable from its cheaper predecessor.
And as for the costs of litigation, cry me a river. Although I can't go into specifics, I can think of specific instances where a drug company has released a drug into the marketplace knowing it would kill a percentage of the people that took it and didn't offer any warning on that somewhat important point. Keep in mind, we're not talking here about a life-saving treatment, where in the absence of taking the drug, the person might die anyway -- I'm talking about a drug that would be equivalent to elective surgery. Yet, it gets released into the market because the determination is made that the drug will make enough money that the wrongful death claims can be paid and the company will still clear a profit. Personally, I consider that criminal.
I could go on and on and it's really tough to explain being handcuffed to some extent as to what I can and can't say on the topic, but the overarching point I'd like people to take from this is that the pharma industry is looking out for their best interests, first, second, and third. They are not motivated by altruism, and ought not get a free pass because they -- like every other industry -- have R&D expenses and have to face competition at some point.
As an aside, I'm not sure where you're getting your figures on the time it takes to bring a drug to market and the amount of time left on the patent once it hits the market -- again, I would consider that to be the worst case scenrio and much more the exception than the rule, and most drugs have much more than a year to recapture their R&D costs. If they didn't, it wouldn't be a good investment of those kind of resources, because drugs don't generally come out of the gate with those kind of sales anyway -- normally takes a couple of years to build up a head of steam. Generics have been around for decades, and the grim predictions you offer have been proven wrong, with pioneer drug companies doing quite well financially.
Sorry this is so disjointed, just kinda rambling. I gotta get back to work.