Obama Seeks More Generic Prescription Drugs
By Nikki Schwab, Washington Whispers
While drugmakers were on team Obama yesterday, agreeing to shrink the "doughnut hole" in Medicare prescription drug coverage by reducing costs by $80 billion over the next decade, they're definitely not gung-ho about all the administration's steps to save dough. Here's another battle to watch within the broader healthcare overhaul: The administration wants to ban makers of brand-name drugs from shelling out "pay-for-delay" settlements to generic drugmakers, a practice that creates a financial incentive for generic drug companies to keep their much cheaper drugs off the market.
"If it's legal for a brand to pay a generic to sit out, why wouldn't it?" Federal Trade Commission Chairman Jon Leibowitz explained today at a Center for American Progress event. "And if a generic drug company is allowed to make more money by not competing than by going to market, isn't that a good business deal for the company and its shareholders? The answer is, of course it is."
Brand-name drugmakers have exclusive rights to their drugs only for a limited time. Generic drug companies can enter the market once the original patent is expired, "invented around," or invalidated. This is when the elbows come out, as brand-name drug companies in recent years have spent millions paying their generic rivals to drop patent challenges. It's often better business for the generic drug company to take the money than to continue the challenge and then put the drug out there. "Clearly these are win-win deals for the companies, but they leave consumers footing the bill," says Leibowitz.
The administration is solidly behind stopping this, and there are bills making their way through the House and Senate that would do just that. If the practice ends, American consumers could save $35 billion over a 10-year period, according to Leibowitz. The government's savings could be $12 billion over 10 years since it pays such a hefty chunk of the nation's prescription drug bill. "And these assumptions are quite conservative," adds Leibowitz.
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Tags: healthcare | prescription drugs | Barack Obama
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Market Study you may be interested in
MediaCurves.com just conducted a national study with 966 viewers of a news clip highlighting the potential dangers of generic brand drugs. illustrating the dangers of texting and driving. Results showed that nearly half of viewers (46%) reported that they are less likely to purchase generic drugs after watching the video. The study also found that 66% of viewers had a more negative perception of generic brand drugs after watching the news clip. More in-depth results can be viewed at http://www.mediacurves.com/HealthCare/J7539-Generic-Drugs/Index.cfm
Thanks,
Ben
Re Barry of CA on The Cost of Drugs
Barry - Outstanding commentary. It is tragic that it seems increasingly difficult for the common man to comprehend the simple reality of a free market's ability to do the most good for the most people most of the time. Not PERFECT good. Not flawless efficiency, but vastly better than any alternative yet derived by man. Those who seek to diminish it in any way, must be carefully scrutinized for their personal entanglement and motivations.
On the face of it, it does in fact seem very self serving and preservationist to buy off a generic company's entry to the market. But with the slightest effort one can recognize in this the very proof of the free market’s fierce efficiency. The generic manufacturers exploit the expensive, expansive work of the brand manufacturers for their sustenance within the law. The manufacturers, in turn, evaluate the situation and respond with their most efficient value proposition, given the environment - and thank goodness they do. Because the day it becomes non-profitable to create and bring life-saving drugs to market, is the day the whole industry collapses.
Today's WSJournal has an article decrying the manufacturers efforts to diminish insurers ability to price patients out of their brand with high copays. The focus of these drug cost arguments are almost always myopic and rarely consider the simple fact that increases in drug expenditures typically lead to lower healthcare costs overall (less emergency room visits and hospitalizations, etc.) and enhanced patient outcomes. Of course they usually ignore the truly insidious effect of unbridled litigation on costs throughout the system.
In an efficient market, the greater good will ultimately be served and the purely self servant will ultimately fail.
So too will every significant player involved in the pending travesty of universal healthcare find a way to profit best for themselves and their stakeholders. Only here the beneficiaries aren’t the public. In the case of government, the weak and inefficient do not fail as they should but instead survive on perpetual life support given freely by the hand that doesn’t earn it (the government) from the hand of those that did not want or choose it in the majority (the people). Tragically most will not comprehend this until it is too late. But it's nice to see someone who does.
The cost of drugs
The cost of doing business must be entirely recovered from customers, if a business is to survive for the long term. Pharmaceutical companies must charge what the market will bear to recover the cost of research, development, drug trials, and the FDA approval process. The amount of time they have to recover these costs is limited by the expiration date of the patent on the drug. Afterwards competitors, who did not bear these costs, will be able to produce the same drug at much reduced costs, because they only need to cover the cost of production, not research, development, testing, and FDA approval.
Therefore these up-front costs must be recovered before the patents expire, before they are confronted with low cost competition. Preventing companies from recovering these costs would prevent future research and development, as there would be no funding for it. Drugs likely to benefit the largest number of people are most likely to be produced, as the costs of research and development can be spread across a larger market of paying customers. Unfortunately the opposite is also true. Vast sums will not be spent on research and development that would only benefit a few people, as there would not be enough customers ready, willing, and able to pay for it. Trade-offs are as inescapable as they are tragic. For example, at some point, the testing designed to save lives from potential side effects costs more lives by keeping lifesaving drugs off the market too long.
Given finite resources, the free market distributes the greatest benefit among the most people, and provides us with the most effective pharmaceutical industry in the world, saving lives and extending lives like never before. But it does have its limits. If you believe these companies are excessively profitable, buy their stock. Look what our government has done to the banking industry, the housing industry, and the automobile industry. I do not even trust politicians to know what is best for us, nor to I trust them to be properly motivated, or be free from corrupting influences. They will only make things worse. Traveling the world you see the standard of living in other countries, and you see that all of the countries with socialized medicine are much poorer, having allowed their politicians to misallocate such a large proportion of their country’s resources on many different things, including healthcare, without much to show for it. Of course there are anecdotal exceptions, and many people go to Mexico and elsewhere to seek extraordinary measures not permitted by safeguards here.
More on Thalidomide:
http://en.wikipedia.org/wiki/Thalidomide
P.S. Sorry about your father. No words of mine could be adequate to comfort you after such a loss. I wish you the strength and understanding needed for you to persevere. My uncle died from a rare drug reaction after a successful bypass operation. I know there is no compensating such a loss.
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