Eli Lilly and Co. and Clinical Trials and FDA and Health Care Reform and Health Care & Life Sciences and Health Care & Insurance and Pharmaceutical

Generic meds cost more than consumers realize

December 15, 2008
In the war against high-priced health care, generic drugs are usually thought of as an ally — and for obvious reasons. Generics can be half the cost — or less — of name-brand equivalents. For consumers, that's good news. But the companies that churn out the lower-cost meds aren't necessarily heroes.

Make no mistake; they're in it for themselves. And in the process of making a quick buck, they drive up the cost of name-brand drugs developed by locally based Eli Lilly and Co. and other pharmaceutical firms.

The manufacturers of generics rely on the billions of dollars Lilly and its peers invest in research to develop new drugs. Once those drugs hit the market, the makers of generics move in to challenge the patents that companies like Lilly rely on to protect their investment, hoping for the OK to make and sell essentially the same drug without the considerable research expense.

Generic drugs have been around since the federal Hatch-Waxman Act became law in 1984. It allows generic drugmakers to ask the U.S. Food & Drug Administration to approve a generic version of a drug four years after it hits the market, even if the patent doesn't expire until several years later.

Generics manufacturers have become more aggressive since Barr Laboratories broke Lilly's patent on the antidepressant Prozac in 2000. The result has been a steady stream of litigation, with the generics challenging patents with abandon and big pharma fighting back in court. The cost of patent litigation is now built into the cost of developing new drugs.

As IBJ reported last week, Lilly is engaged in numerous lawsuits to protect its patents on five different drugs. Together, those drugs represent more than half of Lilly's sales.

It makes sense that after a predetermined amount of time passes — perhaps the length of a patent — the formula or process used to make a drug should be fair game for manufacturers that would sell the same drug for less. But those who voted to allow generics surely didn't anticipate a scenario in which Lilly and others would have to spend millions fighting for their lives over patent protection.

Most of those who follow the drug industry expect that the Hatch-Waxman Act will be revisited to account for the emergence of biotech drugs, which aren't addressed in the current law.

While they're at it, lawmakers should fine-tune the act to rein in the aggression of generics manufacturers. Among the potential remedies: Make the losers of patent challenges pay court costs. Maybe that would make the patent challengers think twice. As it is, there's little incentive for them to allow companies like Lilly to enjoy the fruits of their labor.

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