Drugs With No Patents And No Competition: Here’s Why
Aggressive generic delay practices are troubling because, unlike patent exclusivity, they do not promote any public interest
Increasing the costs of drugs has emerged as a core strategy for pharmaceutical companies to remain ahead in the rat race. In September 2015, Martin Shrkeli, a top biotech entrepreneur of Turing Pharmaceuticals, decided to increase the price of Pyrimethamine from $13.50 per tablet to a staggering $750. This move received an exasperated tweet from Hillary Clinton. She tweeted that “price gouging in the drug market is outrageous.”
It wasn’t only Shrkeli who was blindly increasing the prices of drugs. Valeant also hiked the price of Isoproterenol from $440 to approximately $2,700 per dose. Isoproterenol helps with heart attacks and works to maintain the blood pressure. With the sudden increase in price, many hospitals across the US and other parts were forced to remove the drug from their emergency cash carts.
Price gouging has of late become a hotly-debated topic, and is a common activity of many major pharmaceutical companies.
Price Increase Due To Change Of Ownership
Valeant Pharmaceuticals, a multinational specialty pharmaceutical company headquartered in Quebec, developed a strategy of buying companies and drastically increasing the prices of the acquired drugs. The company purchased two life-saving heart drugs-Nitropress and Isuprel-in February 2015. And on the very same day, they increased the prices of these drugs by 212% and 525% respectively. This hike was not as a result of improved science, but mainly due to change of ownership.
Here are two common reasons why a drug may have no patent and no competitors.
Low-valued drugs with not many companies interested in selling it. The manufacturer maybe a tiny firm, happy with making modest profits or a large firm that continues to sell the drug years after developing it. In either case, the value of the drug does not attract the attention of other vendors.
Medium or high-valued drug that are undervalued. Consequently, there is an opportunity for generic competition or price increases.
What Limits Competition In The Pharmaceutical Industry
Pharmaceutical Market Characteristics
The market for pharmaceutical products exhibits many inherent characteristics that prohibit strong competition. First, it’s extremely expensive and risky to produce new drugs. Experts state that the cost of taking a drug from the lab to the market crosses the $2.8 billion mark. These high costs create obstacles to entry, making it extremely time-consuming and challenging for competitors to hit the market.
Stringent regulatory programs like the FDA’s Patent Restoration Act of 1984 and Drug Price Competition can sometimes bolster anticompetitive behavior. The FDA restricts the pool of potential competitors to safeguard consumers by ensuring efficacy and drug safety, and also to limit generic competition besides supporting new drug innovation under the Hatch-Waxman Act.
Besides the inherent characteristics of the legal systems and pharmaceutical markets that inhibit competition, brand name drug manufactures have recently tried to thwart competition from generic manufacturers through anticompetitive practices, commonly known as “generic delay.”
Generic delay can come in many forms as described below:
Product hopping takes place when a brand name drug manufacturer makes tiny modifications to a drug with an expiring patent, while also taking preventive measures to eliminate or reduce the chances for the original version of the product to enter the market. By making a small change to the drug, manufacturers can receive a fresh patent duration of 20 years.
Pay For Delay and Citizen Petitions
A pay-for-delay agreement between the brand name manufacturer and the generic company ensures to trim competition through a settlement in which the brand name company pays a huge amount to the latter to stay away from the market. The Federal Trade Commission estimates that these agreements cost US taxpayers and consumers over $3.5 billion in higher drug costs every year.
Another way to delay generics is through “citizen petitions.” These petitions ask the FDA to defer action on a pending generic drug application. The law entails that the FDA prioritize these petitions. And these petitions are not filed by individuals but huge corporations. According to the FDA, branded drug manufacturers have recently submitted 92% of all citizen petitions. Most of these petitions are filed near the patent expiration date, which effectively limits potential competition for another 150 days.
“Authorized generics” are an effective tactic to limit competition. In reality, they aren’t generic products but the same product sold under a generic name by the manufacturer selling the branded drug. The first generic firm to launch a drug gets an exclusivity period of roughly 180 days. During this phase, no other company is allowed to market a generic product. However, the company with the expiring patent can launch an “authorized generic.” They simply change the name of the drug which they are already selling and extend their monopoly for another six months.
REMS Based Delay
Brand name manufacturers can also restrict generic manufactures from launching their products in the market by taking undue advantage of the FDA’s Risk Evaluation & Mitigation Strategies (REMS) scheme or by implementing similar preventive distribution schemes.
Brand name drug manufacturers limit access by implementing a restrictive distribution program by which the drug is dispensed by specially certified pharmacies or approved health care centers.
The FDA’s Accelerated Review Policy
Against this backdrop, the FDA recently announced a minor regulatory change of prioritizing review of the original ANDAs, amendments and supplements. According to the policy, the first generic drugs for which there are no exclusivities or blocking patents will receive expedited review. The FDA states that this change could accelerate review of as many as 125 generic drug applications.
Our list of drugs with no patents and no competitors
The escalating prices of drugs are linked with a number of factors out of which, one of the most important is a huge dearth of competition in the market. Aggressive generic delay practices are also troubling because unlike patent exclusivity, they do not promote any public interest, but serve primarily to maximize profits for branded manufacturers.
In order to prevent companies from exacerbating the prices of drugs, it is important to increase awareness among the general public about anticompetitive approaches used to maximize profits without any public benefit.