Posts Tagged brand name drugs
Brand-name or patented medications cost much more than generic medications. One would think some other inventor would dream up an alternative to sell at a lower price. One would also think once the patent expires generics would be be quickly shipped to pharmacies. But, as usual, it’s more complicated than you think and compounded by corporate deals not really in the consumer’s interest.
Patents are for “novel, useful and not obvious” inventions and the exclusive right to sell the item lasts for 20 years in the U.S.. Unless, someone invents something similar that the original patent owner did not think of. Also, the the patent owner can request an extension for various reasons (adjudicated in the courts which usually takes at least a year). Drugs are such inventions. Some of the patented drugs are very profitable (blockbuster drugs) making millions and sometimes billions of dollars.
Big pharmaceutical companies depend on patents for their very existence. The high cost of drug development and FDA approval is recovered during the 20 years of a new drug sales — some say it is often recovered in just 10 years. The patents have become so expansive that other inventors are only able to find a bio similar product that can withstand intense legal action for patent infringement about 15% of the time. But, those 15% spend so much money in legal matters they hardly see any advantage to marketing early.
When the patent runs out the price of a drug can drop 1000% as generic manufacturers enter the market. All patients wish this would happen sooner.
Megan Thompson of PBS presented a video segment about the practices of drug companies on 6/28/14. She told about “pay-for-delay” which is a method of preventing bio-similar products from being marketed by paying generic makers millions of dollars a year to delay marketing until the patent runs our (or longer). She also told about “evergreening” which is a technique used near the end of a patent: the drug price is increased substantially while a patented bio-similar product made by the same company is marketed at a slightly lower price. Doctors trying to help lower cost change patients to the similar product and the patient never knows that in a short time the original drug becomes generic and much less expensive.
According to the FTC the combined “pay-for-delay” and “evergreening” cost consumers billions of dollars and make billions of dollars in drug company profit.
What needs to be done:
- Start a linear profit limitation starting at drug patent year 1 (20% above manufacturing cost) and ending at year 20 (5% profit limitation).
- Notification of patients by pharmacies about lower cost bio-similar products as soon as they come out.
- Eliminate “pay-for-delay” and drug patent extensions.
The per capita annual drug cost in the US is about $900 and in the UK about $200. How can this be? Drug companies are multinational so we all purchase from the same sources.
There are 2 types of drugs in all countries:
- Generic drugs: no basic research cost, multiple manufacturers and generally low cost. 80% utilization but only accounts for about 20% of national drug costs.
- Brand name drugs: still protected by patent, price includes significant research cost, one manufacturer and generally high cost. 20% utilization but accounts for about 80% of national drug costs.
The formulary: this is the list of drugs provided by a pharmacy or hospital. Although there are thousands of drugs manufactured only a small group are included in a given formulary. A formulary usually includes the least expensive drugs and avoids drugs with duplicate actions. Brand name drugs cause problems since they may be a one of a kind without alternatives.
Prescriber intent: prescribers anywhere usually try to minimize drug costs for the patient by prescribing the lowest cost drugs that treat the medical problem adequately. Unfortunately, US doctors often don’t know which drug is most cost effective and succumb to the advertising of manufacturers.
How it works in the US:
Hospitals must include drugs in the price of hospitalization so hospitals have a restricted formulary constructed to minimize cost. Outpatients are different, insurance companies that pay for drugs usually expect the patient to pay a percentage of the price: 1) generic drugs — small copay 2) moderate price drugs — medium copay 3) expensive drugs — high copay (or no coverage at all).
How it works in the UK:
The NHS sets the price it will pay pharmacies for generic drugs and purchases generics in bulk for hospitals. The UK has forced a “voluntary” agreement on brand name drug manufactures that limits the profit they may make — sometimes called a “cost-plus” arrangement. Pharmacies and hospitals obtain brand name drugs under this national agreement. The National Institute of Health and Care Excellence (NICE) investigates the cost-effectiveness of drugs and provides that information to prescribers.
Conclusion: Most advanced countries like the UK limit drug company profits or simply set prices for drugs. People in other countries enjoy lower drug costs than in the US. Multinational drug companies make large profits in the US because of the lack of a national strategy. And, the US supports the research of many drugs with grants to Universities from taxpayers. The drug companies which are restricted in other countries extract a high profit from US patients and benefit from government research.
Solution: Restrict drug company profits in the US similar to other countries. Mandate the FDA to provide cost-effectiveness data on drugs and devices. Develop a national formulary for Medicare and all other government programs.