The pharma industry certainly has its fair share of corruption and just today Dr Jacques Servier, president of France’s second biggest pharma company Servier, has been forced to deny allegations that his company was able to keep a dangerous drug on the market because of his high level political friends.
But corruption in Europe is but a drop in the ocean compared to how the industry works in the US. For starters, drugs cost about double on the US market than in Europe because they know they will pay it – there are no HTA’s or cost-effectiveness bodies there (as the American right constantly shout down the use ‘death panels’) to check to see if a drug is worth the price, so pharma will push the cost as far as they can get away with.
This week, a new dodgy practice has come to the fore, as the Federal Trade Commission released its report on ‘pay for delay’ on generic drugs.
How it should work is that an R&D led company will develop a drug, sometimes with the help of a biotech firm, and if it passes all the necessary pre-clinical and clinical trials and is approved by a regulator, it will be the intellectual property of that company(ies) for around 12 years (depending on a number of factors) and is protected under patent.
At the end of its patent life, small generic firms will copy the patented drug and sell its own version for a much lower price – sometimes as much as 90% cheaper.
This will not need to go through clinical trials – the expensive element of pharma – as it has already been proves safe, and will pass through regulatory proceedings very quickly.
Basically, these companies are looking to make a quick profit and a quick turn around by forgoing the innovative process and banking on what they know works. But this also works out for patients as we can see significant savings on once pricey drugs.
This is also good for competition as it protects a company for a number of years, incentivizing innovation.
But the FTC has found that pharma companies are paying these generic firms to delay launching their cheaper versions in order to eek out more revenue from a drug.
And these can be big numbers - the statin Lipitor, the world’s biggest selling drug, has been making between $10 billion and $13 billion a year in global sales for nearly 14 years.
Its developer Pfizer will lose its US patent protection on the drug this November, meaning nearly all this revenue will be wiped off their books almost overnight by generic firms. If, however, it could pay those firms a few million dollars to delay making a generic version of their drug, they would be paying a small amount of money to keep those revenues for an extra year or so, artificially increasing its patent.
In fact the FTC report found, unsurprisingly, that firms paid by big pharma delayed the launch of their generic version by an average of 17 months, meaning that drug was priced artificially high for nearly a year and a half in the US, just so companies could make more money.
The FTC’s report also found that the number of these agreements has increased by more than 60 % - up from 19 in 2009 to 31 in 2010.
Overall, the deals reached in the latest fiscal year involved 22 brand-name pharma products, with combined annual US sales of about $9.3 billion.
The FTC’s chairman Jon Leibowitz didn’t pull any punches: “Collusive deals to keep generics off the market are already costing consumers and taxpayers $3.5 billion a year in higher drug prices,” he said.
As Leibowitz said: “The increasing number of these deals is a win-win proposition for the pharmaceutical industry, but a lose-lose for everyone else.”
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