High drug price trend has 'infected' generics, experts say

The market price of pharmaceuticals, some costing patients more than $100,000 per year, increases public health spending and sometimes forces patients to make life-or-death decisions when they cannot afford their medications. The authors write that approximately one in five Americans admit they do not fill their prescriptions because of cost. From an economic standpoint, in 2013 the United States spent nearly 40 percent more per capita on pharmaceuticals than the second highest spender, Canada.

Generic drugs, which by law may enter the market once the patent on a brand-name drug expires, are intended to offer an affordable option for patients without sacrificing the efficacy and safety of the original formula. From 2004-2013, generic drugs saved the U.S. health system nearly $1.5 trillion, according to the authors. However, for many patients generic drugs are inaccessible.

"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," said lead author Hagop Kantarjian, MD, of The University of Texas MD Anderson Cancer Center. "Unfortunately, these sorely needed generics are increasingly out of reach. As we sought to understand what keeps these affordable drugs from the market, we identified several specific strategies that pharmaceutical companies use to extend their patents and eliminate competition."

In this Blood Forum article, a feature of the journal designed to present well-documented opinions on issues important to the science and practice of hematology, Dr. Kantarjian and colleagues assert that pharmaceutical companies use a variety of strategies to delay, prevent, and suppress the timely availability of affordable generic drugs. Among them, the authors detail "pay-for-delay," in which the company that owns the patent pays a generic company to delay entry into the market. The Federal Trade Commission estimates that the pay-for-delay settlements cost taxpayers, insurance companies, and consumers approximately $3.5 billion per year. In other cases detailed in the article, the patent-holder deters competition by creating its own version of drugs at generic prices. While this practice may reduce costs for consumers by 4-8 percent in the short-term, the authors suggest that companies often use the authorized generics as a bargaining chip in "pay-for-delay" deals, pledging not to release their own drugs in return for the true generic company promising to delay market entry.

Other strategies the authors discuss include investing heavily in advertising the brand-name drug (often spending more on marketing than on research and development) and lobbying for laws that prevent patients from importing cheaper generics from other countries, which the authors write can cost as little as 20-50 percent of U.S. prices. The authors also highlight some drug companies that they allege buy out competitors and then increase the price of a newly acquired generic drug by several fold overnight.

In addition, the authors also describe a strategy they call "product hopping," which involves switching the market for a drug to a reformulated "new and improved" version with a slightly different tablet or capsule dose that offers no therapeutic advantage over the original but has a later-expiring patent. The company then heavily advertises the new brand-name drug in an effort to convince patients and physicians to switch. As a result, when the generic version of the original becomes available, pharmacists cannot substitute it for the new branded version because state laws allow substitution only if certain characteristics, such as dosing, remain the same.

In recognition of the harm and expense that the authors suggest these strategies impart on both patients and the economy, they propose several solutions that would support timely access to affordable generic drugs, including allowing Medicare to negotiate drug prices, monitoring and penalizing pay-for-delay deals, allowing transportation of pharmaceuticals across borders for individual use, and challenging weak patents.

"Each day in my clinic I see leukemia patients who are harmed because they cannot afford their treatment, some risking death because they cannot pay for the medicine keeping them alive," said Dr. Kantarjian. "Overall, these strategies demonstrate that the trend of high brand-name drug prices has recently infected generic drugs, as companies value profit at the expense of long-term utility to society. 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."