Drug Companies Preventing Generic Drugs

F O R T  L A U D E R D A L E, Fla., May 1, 2001 -- If you had a choice between a costly prescription drug and its cheaper, generic version, which would you choose? Often, do you even have the choice?

While 3 billion prescriptions are filled annually, 44 percent are filled generically — yet that equals only 10 percent of the nation's drug bill. Americans spend $145 billion per year on prescription drugs, according to IMS Health, which provides market research to pharmaceutical and marketing companies.

And the pharmaceutical companies that make the brand name drugs want to keep it that way.

Legislation was introduced in Congress today to reform the laws regulating when particular drugs may be sold in their generic form. This is important to consumers because the generic drug, which won't have a brand name, is, on average, 70 percent cheaper.

And according to the National Association of Pharmaceutical Manufacturers, if the number of generic prescriptions increased by a mere 1 percent, Americans would save $1.4 billion a year.

Buying Time to Maintain Price Control

Currently, pharmaceutical companies have the exclusive right to sell the drugs they develop for 20 years, the time during which the drug may not be sold in its cheaper, generic form.

But the drug companies have invariably found ways to keep the generic version of their brand name product off the market for a longer period of time — to buy more time and delay market competition. The legislation introduced is designed to close the loopholes.

"You're seeing more and more brand name manufacturers keeping generic drugs out of the market place by effectively manipulating the patent system," says Nancy Chockley of the National Institute for Healthcare Management.

Andrx, a maker of generic drugs in Florida, is on the receiving end of the newest strategy. The company was ready to sell a cheaper version of Prilosec, the hugely popular drug used to treat ulcers and heartburn.

"They have been on the market with this product for approximately 13 years in the United States and had $33 billion in sales over that period of time," explains Elliot Hahn of Andrx, who thinks that is long enough.

But Astrazeneca, the manufacturer of Prilosec, recently won new patents that were not related to how the drug works in the body but to how it is made in the factory.

The strategy is called "patent stacking," where companies stack on any patent they can, just as its original patent is about to expire.

"Some of them are as frivolous as the color of the bottle," says William Nixon of the Generic Pharmaceutical Association in Washington, D.C. "Every new patent that they can put through the patent and trademark office wins them another two-and-a-half year windfall at the expense of the consumer."

It takes two-and-a-half years because add-on patents automatically delay the approval process of generics by the Food and Drug Administration.

Staggering Sales Provide Incentive

The generic industry expects more battles like this one because over the next few years, patents will expire on about two dozen popular brand name drugs, with sales exceeding $30 billion.

Drugs such as Accutane, Augmentin and Flovent all come off patent within the next couple of years alone.

For Prilosec's maker, Astrazeneca, the time it has gained will represent about $11 billion in sales. The company declined requests for interviews.

An industry spokesman says adding on patents is legal and allows companies to earn more money to innovate.

"It's essential that the companies are able to protect their legitimate patent rights," says Alan Holmer of the Pharmaceutical Research and Manufacturers of America. "That's what this debate and balance is all about."

The bill outlined today would make it far more difficult to patent stack. With billions at stake for business and for consumers, a very tough battle is expected ahead.