Despite Expiring Patents, High Drug Prices May Persist

From the WebMD Archives

Aug. 18, 2000 (Washington) -- With America on the verge of the largest cycle of drug-patent expirations in the nation's history, analysts remain decidedly divided on what benefit, if any, consumers will enjoy from this unprecedented trend.

Over the next four years, an estimated $34 billion worth of blockbuster drugs, including the antidepressant Prozac and the antihistamine Claritin, will lose their patent protection, according to IMS Health, a market research group. While Wall Street analysts predict these patent expirations will decrease overall drug prices, consumer representatives and makers of generic drugs argue that prices will remain unjustifiably high unless legislation to decrease brand-name drug prices or require the use of generic alternatives is enacted.

"The brand-name drug industry is a very greedy industry," says Frank Clemente, director of Congress Watch, a division of the consumer watchdog group Public Citizen. Generic drugs ultimately could save consumers billions in health care costs, but makers of brand-name drugs already are employing every weapon in their arsenals to ensure both the predominance of their products and their relatively high prices, he notes.

Brand-name drug makers do need to keep profits healthy, says Jeff Trewhitt, spokesman for the Pharmaceutical Research and Manufacturers of America, the main industry group. Investors know that four out of five potential new drugs will never see the light of day, he says. And while the industry's profit margin may be healthy, investors need high returns to justify that gamble, which amounts to about $26.5 billion a year, he says.

Among other drugs whose patents are scheduled to expire soon are the anti-anxiety drug BuSpar, the hair-loss treatment Propecia, the hypertension drug Vasotec, and the osteoporosis medication Evista, according to IMS Health. But the makers of these and other brand-name drugs will not let these patents expire without a fight, even though the companies already have more than recouped their research and development costs, Clemente says.

On Aug. 9, a federal court cleared the way for early generic competitors of Prozac when it reversed a lower court ruling that had given drug maker Eli Lilly and Co. patent protection through 2003 instead of 2001. Though that was a victory for consumers, other drug companies may be more successful in extending the patent protections for their drugs.

Drug maker Schering-Plough Corp. on Wednesday said the FDA has approved a six-month extension on its Claritin patent because the company had performed tests of the drug in children. A few years ago, Congress agreed to give drug companies extended patent time if they would test their medicines in children.

Robert Milanese, MBA, is president of the National Association of Pharmaceutical Manufacturers, an industry group representing generic drug makers. For him, the Claritin debate is a good example of brand-name drug makers' "greed."

But brand-name manufacturers have several ways to keep drug prices high even after losing patent protection, Milanese tells WebMD. These include generous advertising budgets to promote brand loyalty despite the emergence of cheaper generic competitors, he says.

Consumers eventually will see a benefit from the approval of more generic competitors to these brand-name drugs, even if initially it's just in the amount of their insurance copay for prescription drugs, Milanese tells WebMD. But brand loyalty is likely to offset a good portion of that benefit, he says, while noting that generics already account for about 45% of all prescription drugs sold today and less than 10% of the nation's drug bill.

"A lot of times, consumers are not even aware that there is a generic product available," he tells WebMD. "Generics are part of the solution, but not the entire solution."

The potential benefit of approving generic drugs has not been lost on Congress. In an attempt to speed up the processing for generic drug applications, the Senate already has adopted an amendment that would add $2 million in funding for the FDA's Office of Generic Drugs. Combined with a $1.2 million increase included in an earlier appropriations bill, that office would now receive a 10% increase over its current funding if those bills pass by October.