Tarnished
Heroes of the Drug Industry
By
Phil Mattera, Dirt
Diggers Digest
Generic
drugmakers are supposed to be the heroes of the pharmaceutical business,
injecting a dose of competition in what is otherwise a highly concentrated
industry and thus putting restraints on the price-gouging tendencies of the
brand-name producers.
Just
recently, the Food and Drug Administration approved a generic version of
Copaxone, paving the way for the first multiple sclerosis medication that is
not wildly overpriced.
Yet
some generic producers are acting too much like Big Pharma. Israel’s Teva
Pharmaceuticals just announced a $40 billion offer for its rival Mylan NV,
which had recently made its own bid for another drugmaker, Perrigo. A marriage
of Teva and Mylan would create the world’s largest generic drugmaker with more
than $30 billion in revenue from customers in 145 countries.
Even
before the Mylan deal, Teva’s shining armor has been getting tarnished.
Recently, its subsidiary Cephalon agreed to pay $512 million to settle
allegations that it made questionable payments to other generic producers to
keep their cheaper versions of the narcolepsy drug Provigil off the market.
Last
year the Federal Trade Commission sued Teva and AbbVie for colluding to
delay the introduction of a lower-priced version of the testosterone
replacement drug AndroGel.
While AbbVie filed what the agency called “baseless
patent infringement lawsuits,” it also entered into an “anticompetitive
pay-for-delay” deal with Teva. Mylan’s record also has blemishes. It once had
to pay $147 million to settle
price-fixing allegations.
A
weakening of the deterrent power of generics is troubling at a time when the
brand-name producers remain sluggish in their introduction of new drugs and are
doing everything possible to milk their existing offerings.
Their idea of
innovation seems focused these days on what are known as “biosimilars,” close
copies of certain brand-name drugs that are somewhat less expensive but much
more costly than traditional generics. In March the FDA approved the first
biosimilar, a cancer drug called Zarxio made by Sandoz. Pfizer indicated its
intention to compete in this arena by announcing plans to acquire biosimilar
pioneer Hospira.
Rising
drug costs are, of course, a concern not only for individuals but also for
taxpayers. The Medicare program, which thanks to the Bush Administration and
Congress cannot negotiate with pharmaceutical companies, now spends about $76 billion a year providing drug
benefits.
To
be fair, Part D costs in recent years have been lower than the Congressional
Budget Office had previously projected, but the CBO attributed the
difference in large part to the increased use of generics. If generic producers
continue to consolidate — and collude with brand-name producers — those savings
will evaporate and we will be completely at the mercy of Big Pharma.