The Journal of Life Sciences

By Peter Pitts

 

February 4, 2009

 

According to a new Harris poll, 81 percent of Americans say they prefer generics to brand-name drugs. That’s good news. It means the message that FDA-approved generic drugs are safe and effective is finally getting some traction. And the cost savings are significant. But, as usual, there are those who would use this news for their own purposes. In this case, it’s the Generic Pharmaceutical Association.

In January, the Generic Pharmaceutical Association applauded the introduction of HR 573, a bill that would prohibit the marketing of authorized generics during the 180-day generic exclusivity period. Authorized generics, also known as “branded generics,” are prescription drugs produced by brand pharmaceutical companies and marketed under a private label and sold at generic prices.

Kathleen Jaeger, chief executive of the association, sees the proposed legislation as a way to close a “loophole” in the 1984 Hatch-Waxman Act. That act allows innovator life science companies “to delay generic competition by discouraging generic companies from challenging weak and potentially unenforceable patents.” She praised the bill’s sponsor, Republican Jo Ann Emerson from Missouri, and colleagues for “working to close this loophole for the benefit of consumers struggling with healthcare costs during these difficult economic times.”

Well, if we’re all in this to help consumers control costs, then this bill would achieve precisely the opposite.

If the Generic Pharmaceutical Association gets its way, the category of medicines known as “authorized generics” will vanish—and drug prices for millions of Americans could go up by as much as 17 percent. (This calculation is based on a comparison of what consumers actually spent on generics during the 180-day exclusivity period to what they would have spent to purchase the same quantity of generics at higher prices in the absence of a branded generic launch.)

Historical pricing data shows that brand companies launch their generics at a 50 percent discount off retail price compared to a 30 percent discount experienced when a generic drug has no competition. If HR 573 passes, consumers and taxpayers over the next two years would realize about $8 billion instead of $13 billion in savings. Cui bono? The missing $5 billion will line the pockets of a handful of generics companies. That’s quite a cui bonus. This end-run around Hatch-Waxman is an extended finger to the FDA, the FTC, and judicial precedent. (A Federal Appeals Court made it clear that Hatch-Waxman allows for authorized generics).

Over the next few years about $60 billion in brand drugs will become generic; $30 billion of that will be sold without competition for 180 days if Ms. Jaeger and Representative Emerson get their way.

No wonder this proposal is being greedily embraced by the generics industry and Big Pharma bashers. (And greedy is hardly hyperbole since profits on generic medicines exceed 45 percent—even when there is a competitive branded generic on the market).

We all call the existing legislation by its inside-the-Beltway designation, “Hatch-Waxman”—but let’s not forget that the full name of the law that brought the generic industry into being is the Drug Price Competition & Patent Term Restoration Act—not the Generic Drug Company Guaranteed Profit Act. When the media and generic drug lobbyists conflate suspicious stalling tactics with legal and consumer-friendly market actions, neither the truth nor the public health are served.