High Drug Prices Said “Infecting” Generics

28.01.2016 -

The pharmaceutical industry has often been accused of trying to keep affordable generic drugs off the market, with the addition – for example – of new indications or product features to extend patent life. Pointing to an emerging trend they say is becoming as harmful to consumers as high-cost brand-name drugs, the authors of a recent study published in Blood, the Journal of the American Society of Hematology (ASH), highlight several strategies they accuse drugmakers of using.

The criticism is leveled entirely at the US market, where the study calculates that nearly 40% more per capita is spent on pharmaceuticals compared with the second highest spender, Canada (where medicines are paid through the national health system).

One of the strategies singled out for mention is “pay-for-delay,” in which the patent-holder pays a generics company to delay the launch of a drug. Citing estimates by the US Federal Trade Commission, the article in Blood says this can cost US taxpayers, insurance companies, and consumers around $3.5 billion per year.

In other cases, the authors say pharmaceutical producers deter competition by creating their own version of drugs at generic prices, a tactic they also leverage as a bargaining chip in "pay-for-delay" deals in which they agree not to release their own drugs in return for the generics producer’s promise to delay.

Other strategies discussed include heavy investment by US manufacturers of patented drugs in advertising the brand-name product (often spending more on marketing than on research and development) and lobbying for laws that prevent patients from importing cheaper generics for as little as 20-50% of US prices.

Also highlighted is the buy-out of competitors in which the new owner subsequently drastically increases the price of a generic drug overnight – as seen recently in Turing Pharmaceuticals’ acquisition of marketing rights to the toxoplasmosis treatment Daraprim, a 62-year-old drug sold only in the US. Thereafter, Turing jacked up the price from $13.50 per pill to $750.

“Product hopping,” a drugmaker’s launch of a new and improved version with a slightly different tablet or capsule dose that offers no therapeutic advantage over the original but extends patent life also comes under fire in the study.

All of these strategies, the authors say, increase public health spending and sometimes forces patients to make life-or-death decisions in cases where they cannot afford their medications. Around one in five Americans, they estimate, do not fill their prescriptions because of cost.

From 2004-2013, according to the study, generic drugs saved the US health system nearly $1.5 trillion. “The timely availability of affordable generic drugs is the difference between life or death for patients with cancer and other diseases who cannot afford brand-name pharmaceuticals, the majority of which are priced at monopoly levels and protected by 20-year patents,” says lead author, Hagop Kantarjian of The University of Texas MD Anderson Cancer Center.

To help remedy the situation, the authors propose several solutions, including allowing Medicare – the public healthcare service available to elderly people who paid into the system while working – to negotiate drug prices, while monitoring and penalizing pay-for-delay deals, allowing transportation of pharmaceuticals across borders for individual use and challenging weak patents.

The trend to high prices for brand-name drugs has “infected” generic drugs, as companies value profit at the expense of long-term utility to society,” Kantarjian says: “ We must be vigilant in recognizing these strategies and advocating for solutions that will allow companies to accomplish their dual mission: make reasonable profits and help save and/or improve patients' lives.”

The high level of US drug prices also has become an issue in the run-up to presidential elections in November of this year. Democratic frontrunner Hillary Clinton harvested praise from the public and created some degree of panic among drug companies that came under scrutiny in the wake of the move by Turing, whose then-CEO meanwhile has been jailed on fraud charges in conjunction with other alleged wrongdoings.

Two US senators, both Democrats have pressed for action to curb rising prices for generic drugs. The Medicaid Generic Drug Price Fairness Act that passed the US House of Representatives in December 2015 was drafted by Democratic presidential candidate Bernie Sanders of Vermont, and Elijah Cummings, a US representative from Maryland. Should it pass the Senate in its present form and become law, starting in 2017 it would require pharmaceutical companies to reimburse Medicaid if the prices of their generic drugs rise faster than the rate of inflation.

According to a study by the Office of the Inspector General at the US Department of Health and Human Services, US generic drug prices rose faster than inflation between 2005 and 2014. If drug companies had already been required to give rebates to Medicaid over that 10-year period, according to a news release from Sanders’ office, the Medicaid program would have saved more than $700 million in 2013 and 2014.

“It is unacceptable that Americans pay, by far, the highest prices in the world for prescription drugs,” Sanders said in a news release. “The United States is the only major country on earth that does not in one form or another regulate prescription drug prices and the results have been an unmitigated disaster.”