Industry and Regulatory Strategy the Generic Drug

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.

Advantages and Disadvantages

The drugs just mentioned "lose patent protection by 2013" (Bio Job Blog.com. February 1, 2010. P.1), which will impact the revenue stream for the aforementioned companies. GPA understands that the new legislative proposal will reduce Big Pharma revenues as patent protections expire sooner however, the proposal will include a six percent royalty provision for the first three years after the generic is introduced to ensure that the company maintains ample revenue stream. Certainly Big Pharma lobbying groups will fight this legislation as an attack on their innovative products and contending that the reduced profit will undermine scientific study and the development of new drugs. GPA believes that the profit motive will still be a great incentive to invest and develop these innovative pharmaceuticals.

If the U.S. is to get hold of increasing health care costs, the pharmaceutical industry is a logical place to start; "increases in prescription drug costs have outpaced other categories of health care spending, it is projected to exceed the growth rates for hospital care and other professional services in 2010 and through 2019" (Kaiser.edu.org. N.D.P.1). This legislation does not just serve the generic pharmaceutical industry, but allows Big Pharma to continue making considerable profits, while bringing lower priced alternatives to the public.