Patent reform and competition in the generic pharmaceutical industry

Industry and Regulatory Strategy

The generic drug industry provides the public with pharmaceutical alternatives to branded big name prescription drugs. "In 2010 alone, the use of FDA-approved generics saved $158 billion, an average of $3 billion every week."(Generic Pharmaceutical Association. 2011. P.1). With the continuing increase in health care expenditures and health insurance premiums for business and consumers; in 2011 premiums increased by nine percent (Abelson, Reed. September 27, 2011. P.1), and "with so many people relying on prescriptions, the cost implications loom large for the American public, health insurers, and government payers" (Kaiser.edu.org. N.D.P.1). Generic drugs must play a more prominent role in the U.S. health care profile, as such as CEO of the Generic Pharmaceutical Association (GPA), the organizations legislative push is toward patent reform which would call for generic drug competition within seven years of the name brand drug introduction. In so doing pharmaceutical prices would fall dramatically and consumers who must make the difficult choices between prescriptions and groceries would be spared this pernicious exercise.

The big name pharmaceutical firms rally against generic alternatives as poachers of their existing business. Certainly, these companies want to protect their profits; "pharmaceutical manufacturing was the most profitable industry in the U.S. from 1995 to 2002, and in 2008 it ranked third with profits after taxes of about 19%" (Kaiser.edu.org. N.D.P.1). Yet, patent protection for drug company products provides financial coverage for twenty years, a period in which these companies reap considerable profits. In many cases,

Pharmaceutical companies have been accused of obtaining a new patent on a slightly different version of a drug about to go off patent to extend their favorable market situation, and these patent protections have garnered criticism by some groups for limiting access to competition and making some life-saving medications unaffordable for patients. (Kaiser.edu.org. N.D.P.1)

The top 10 generic drug companies, names such as: Teva Pharmaceuticals, Mylan, and Greenstone (Hollis, Liz. August 10, 2010. P.1) are making concerted efforts to help consumers by offering low cost alternative medication to consumers and the health care industry. "A generic drug is identical -- or bioequivalent -- to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use" (U.S. food and Drug Administration.gov. 2011. P.1). The continued emergence of generic drugs as lower priced alternatives to brand name prescription pharmaceuticals will facilitate bending the cost curve downward on health care costs overall.

Proposal

Under existing patent law, companies such as Pfizer, Bristol-Myers Squibb, and Eli Lilly can protect their pharmaceutical products from competition for 20 years. The Generic Pharmaceutical Association is first to acknowledge the cost and tremendous investment necessary for these firms to bring their innovations to market, which makes the GPA proposal a win-win for Big Pharma, generics, and the public as a whole.

The GPA proposes federal legislation which would amend "The Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the Hatch-Waxman Act" (U.S. food and Drug Administration.gov. 2011. P.1)). As originally designed, "generic drug companies gained greater access to the market for prescription drugs, and innovator companies gained restoration of patent life of their products lost during FDA's approval process" (U.S. food and Drug Administration.gov. 2011. P.1)). The new legislation would alter the 20-year patent term, reducing the timeline for brand name drug protection to only seven years, before a generic alternative could be released. The GPA contends that this change will allow generic drugs to enter the marketplace more quickly, reducing the inflated price of brand name pharmaceuticals, and saving the public billions of dollars. As an example; Pfizer's Lipitor, Plavix by Sanofi-Aventis and Bristol-Myers Squibb, and Advair by GlaxoSmithKline; were the number one-, two- and fourth best-selling drugs in 2008 with global sales of $13.7 billion, $8.6 billion and $7.7 billion respectively" (Bio Job Blog.com. February 1, 2010. P.1). These drugs have generated substantial profits for Big Pharma, yet prices have remained high for consumers, hospitals, and insurers. The GPA wants generic companies to have the ability to offer these products at lower prices and serve the public interest.

Conclusion

The hallmark of the U.S. health care system is innovation and advancement which provides lifesaving and life ameliorating products and services to health care consumers. Much of this technological production is in the pharmaceutical industry, "a global market growing at an annual rate of 4-7%, and expected to continue through 2013 with revenues exceeding $975 billion. The U.S. pharmaceutical market, the largest in the world, is expected to drive much of this growth" (Bio Job Blog.com. February 1, 2010. P.1). The Generic Pharmaceutical Association applauds this thriving industry, yet wants these profoundly life changing medicines to be more affordable for the health care consumer. With Big Pharma's record profits, legislation which GPA endorses would shorten the patent protection for these drugs, and allow firms to release generic lower priced alternatives. Big Pharma would lose some profits however; the three-year royalty process in the bill would keep revenue inflow for these companies. The bottom line is that this bill is a win-win for all parties. Generic pharmaceutical companies are allowed to compete in the brand name drug business more quickly, Big Pharma still generates large revenue streams, and most importantly the U.S. health care consumer benefits from more affordable prescription drugs.