NPR Asks, “Are Profits ‘Evergreen’ for Brand-Name Drugs?”
Brand-name drug companies have succeeded in delaying the availability of generic medicines -- and thereby extending their profits -- with a "sophisticated" tactic called "evergreening," NPR's "All Things Considered" reports. Under this strategy, pharmaceutical firms apply for new patents on "modestly improved" versions of already-existing products. "This makes it almost impossible for a generic to come on the market against the new, improved form," health policy analyst Mickey Hunt said, adding, "The drug company then markets this new, improved form to the medical community, and they will tend to shift their patients ... to it." According to Richard Feinstein, assistant director of the Federal Trade Commission's bureau of competition, evergreening hinders competition among drug firms and drives up costs for patients. "The competition gets fairly fierce between the generics, and the price of the generic often drops pretty substantially below the level of the [brand-name] product," he said, adding, "to the extent that process is impaired or delayed, that's really taking money out of the pockets of consumers." Hunt points out that the cost of pharmaceuticals often drops "dramatically" -- as much as 90% in two years -- after generic versions reach the market, and the General Accounting Office estimates that Americans could save about $10 billion per year through "greater use" of generic drugs. To justify patents and patent extensions, the "life blood" of the drug industry, pharmaceutical firms argue that they shell out about $500 million in research and development costs to bring one new drug to the market, expenses that generic firms do not have. Still, Hunt maintains that laws allowing "continual" patent extensions may hurt innovation, encouraging drug firms to invest less in developing new products. During the past 10 years, for example, the FDA has approved 857 new drug applications, about 50% for new versions of existing drugs and only 36% for new products, Hunt said. "Which would you choose," she asked, "to undertake this long, risky process, expensive process, of developing a breakthrough drug when you can probably make more money easier and with less risk by developing a new, purified form or a different dosage form or a modestly improved form of a product that's been proven?" She added that with America's "aging population," a group at risk for chronic and acute diseases, investing in incrementally improved drugs will not benefit the nation as much as "breakthrough" products. "The issue is really one of value," Hunt said. Over the next five years, pharmaceutical companies will lose patents for products that bring them $35 billion per year, including 27 cancer medications, 18 mental health drugs and 53 heart medicines. Meanwhile, Congress will debate whether to stop the practice of evergreening and "ease the path" for generics entering the market (Neighmond, NPR, "All Things Considered," 11/28). To listen to the NPR report, go to http://www.npr.org/ramfiles/atc/20001128.atc.17.ram. Note: You must have RealPlayer G2 to listen to the report.This is part of the KHN Morning Briefing, a summary of health policy coverage from major news organizations. Sign up for an email subscription.