OPINION:
In the effort to mitigate out-of-control health care costs, pharmaceutical drugs make an easy bad guy. No one wants to vilify doctors, no one wants to say “get an X-ray instead of an MRI,” no one wants European- or Canadian-style waiting lines. Picking Big Pharma as the black hat makes for an easy narrative, especially with villains like the price-hiking Martin Shkreli twirling his moustache so evilly.
One long-standing solution to mitigating costs has been generics, a pharmaceutical drug with the same chemical substance as a drug whose patents have expired. This increases competition and keeps prices down. Since the HatchWaxman Act, generics came to market in a standardized pathway that helped many people for most of the last 35 years. So there’s an almost universally accepted desire to increase the number of generic drugs in the marketplace, since they’re supposedly cheaper than their branded counterparts. But they’re not perfect, and recent developments have actually exposed some egregious behavior by the generic industry.
Companies that develop new drugs — “branded” pharmaceutical companies — pour billions into R&D, and require a certain period of time to make both that money back and a profit that justifies the enormous risk. This period is usually five years. Once that time has passed, generic drug makers can model competitor drugs based on those chemical antecedents.
But greedy generic companies are using an accelerated form of patent challenge, called Inter Partes Review (IPR), to bully their way into invalidating pharma’s intellectual property protections before that time has passed. Indeed, so-called trolls have made a cottage industry of challenging patents to gain early access to markets by copycatting innovator companies, poaching patents through litigious double jeopardy.
Even if this gets some people cheaper drugs in the short term, it will destroy the next generation of medicine in the long term.
It has never been more expensive to take a newly invented drug from conception to approval. While the average cost of developing a new drug was $1.18 billion in 2010, it was $1.99 billion in 2017. (That’s a 70 percent jump in seven years.) The more expensive this gets, the harder it is for companies to make their money back. While it’s very easy to make Big Pharma the bad guy in a world of never-ending drug needs, if they can’t make a reasonable profit making new medicines, they’ll stop making new medicines.
In a well-intentioned, but misguided, effort to bring down health care costs, Sen. John Cornyn, Texas Republican, has introduced legislation that would place additional burdens on branded companies by calling their intellectual property into doubt. It would combat what Mr. Cornyn refers to as “patent thicketing,” which extends a company’s patent every time they innovate. (Such as if researchers realize that a drug originally created as a pill would be better administered as a patch.) Again, well-intentioned, but a company protecting intellectual property rights because of continuous improvement hardly seems like robbing the public good.
Mr. Cornyn is a champion for competition and free markets, and almost certainly believes that these attacks on pharmaceutical IP will increase generic competition and reduce drug costs. But it isn’t that simple. The patent protections given to innovative medicines under our current system are crucial to preserving the incentive for drug companies to innovate. If we continue to chisel away at them, what happens to the generic drug industry when it has no innovative drugs to copy? Why should we cap our ability to treat deadly diseases at the status quo, rather than encouraging innovators to find a cure for cancer?
Although they were created to be the good guys in the health care battle, generics have a history of violating rules for profits. For example, generics have been admonished for substandard manufacturing conditions as well and underpaying Medicaid rebates.
More shockingly, 44 states have sued 20 generics manufacturers for price fixing and collusion. Teva Pharmaceutical Industries was named as the ringleader, while 15 other named companies “willingly participated.” (They can share a cell with Shkreli.)
Speaking of Shkreli, generics are just as capable of price gouging. Increases as high as 2,000 percent have been documented, with one Mylan and Sun Pharmaceuticals asthma drug price ratcheted up 3,400 percent and Mylan’s second-most senior executive was caught in another instance for price-fixing.
Problems connected to generic drugs get worse the farther one goes down the supply-chain — and 80 percent of active ingredients in U.S.-consumed drugs are produced elsewhere.
Given data integrity issues with drug companies in India and China, many doctors are questioning whether or not the drugs are working the way they’re intended. The FDA has increasingly issued warning letters to production plants in India and China, with both countries receiving 39 of 61 notices from the FDA in 2017.
If the FDA struggles to keep all drugs safe at home, how could they possibly account for drug manufacturing abroad?
Lack of quality control in foreign supply chains hits home. Last year, one Ohio man went into congestive heart failure after his diuretic for surgery was switched to a generic brand, a generic made in India by a company the FDA had warned the year before for failing to meet U.S. standards.
Generics can play a role in our nation’s health, but they seem to want top billing rather than a supporting role. If they upstage Big Pharma, they could make everyone in the audience sick. Generics, and regulators, need to realize this.
• Jared Whitley worked in the U.S. Senate for Orrin Hatch and the White House for President George W. Bush.
Please read our comment policy before commenting.