Do Generics Have Big Pharma Running Scared?

While the positive news on price reductions of medications for senior citizens is rightfully being welcomed, the acceptance of this by the big drug companies is most likely not too much of a headache for them.

Considering the market value of the big boys, an $80 billion dent in their collective wallets spread out over a decade to help address “the doughnut hole” problem isn’t huge.

The AARP Public Policy Institute explains in their fact sheet entitled Closing a Gap in Medicare Drug Coverage: How to Help Millions of Beneficiaries Afford Needed Medication what “the doughnut hole” is. This is a gap in Part D coverage where Medicare beneficiaries have to “pay the full cost of drugs - while still paying their premiums - until reaching the plan’s catastrophic limit.” The AARP states that more than 3 million are at risk of this.

The doughnut hole for an individual currently stands at $3454 and is expected to have soared to over $6000 in seven short years. In addition, they observe that “completely closing the doughnut hole would cost $134 billion over the next ten years, according to The Congressional Budget Office.”

Paying for generics at a fraction of the cost of brand name drugs certainly has its appeal for both patients and the government. It makes financial sense, plain and simple. It’s not the $80 billion that big pharma should be worrying about. It’s those pesky generics out to grab a slice of their enormously profitable pie.


Generics are FDA approved. Period.

What holds back some people from not using generics more is a vague fear that generics are somehow not up to standard in either quality or effectiveness, nor as safe, as a brand name product. That assumption is simply untrue.

The FDA has addressed such concerns on its website on a special page devoted to crushing such myths. Under the heading Generic Drugs: What You Need to Know, they confirm that the generic version is in fact identical. “A generic drug is a copy that is the same as a brand-name drug in dosage, safety, and strength, how it is taken, quality, performance, and intended use.” The FDA goes on to say that the testing is just as stringent as for a brand name drug.

So if it’s the same drug, just as safe and just as effective and FDA approved too, then that begs the obvious question: how can a generic version be cheaper? The FDA goes on to explain.

Generic drugs are less expensive because generic manufacturers don’t have the investment costs of the developer of a new drug. New drugs are developed under patent protection. The patent protects the investment–including research, development, marketing, and promotion–by giving the company the sole right to sell the drug while it is in effect. As patents near expiration, other manufacturers can apply to the FDA to sell generic versions. Because those manufacturers don’t have the same development costs, they can sell their product at substantial discounts. Also, once generic drugs are approved, there is greater competition, which keeps the price down. Today, almost half of all prescriptions are filled with generic drugs.

It’s not and never has been a question of quality. For generics to succeed in the marketplace, it is crucial both doctors and patients know and understand that. As Gary Buehler, M.D., director of the FDA’s Office of Generic Drugs says on the page, “People can use them with total confidence.”


Big pharma would prefer you didn’t know that.

No small wonder then that large pharmaceutical companies do whatever they can to thwart their generic competitors. Their current arsenal of furtive delaying tactics, employed to slow or even halt the growth of a competing generic drug’s market share or development, is under threat. News articles are popping up describing their methods, shining what is surely an unwelcome spotlight on what really is going on.

One example of how far they’re willing to go is this.  Some pharmaceutical companies will repackage their brand name products and sell them as “authorized” generics. (See today’s Wall Street Journal story FTC: ‘Authorized’ Generic Drugs Harm Generic Cos. )

At first glance it may seem a crazy idea to deny themselves the profits that a recognizable brand brings. Suppose though a patient insists on getting a prescription for a generic drug instead of a brand name one to save money? From the big company’s point of view, it may as well be theirs. What they’ve lost in profit margin by selling the generic version as opposed to the branded drug, they’ve gained by taking that sale entirely out of the hands of a competitor.

With that revelation today in the WSJ, coupled with a press story yesterday on their practice of paying other companies to delay or quit entirely the process of bringing their generics to market, big pharma must be swallowing Tylenol like M&M’s. (Non-generic of course. Unless authorized.)

With these somewhat sneaky (although perfectly legal) practices being brought out into the open thanks to closer governmental scrutiny, it feels like change is in the air. Barriers are being removed and the doors of increased opportunity are slowly but surely creaking open.

For once the little guy, both your average Joe and the smaller generic drug developers and manufacturers, stands a better chance against these pharmaceutical Goliaths than at any previous time in history I can recall.

Generic companies undoubtedly have plenty of ammunition for their slingshots. What these Davids need is to be given ample space to draw back their firing arm so they can trounce the right target and at the same time do something heroic for the little people.

Are big pharma running scared? I don’t know. But they should be.

Written by Kay Elizabeth. Find more of her writing at Hill Holler.

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