Court verdict could give generic drug makers an unfair advantage

Generic drug companies are pressuring Congress to pass a bill that would profoundly alter how drugs are developed and sold. Supporters claim the measure will expand choice and lower prices for consumers. The truth, however, is that it will limit competition and drive up prices.

In recent years, the generic drug industry has been growing by leaps and bounds. Once seen as fringe players, generics now account for 65 percent of all U.S. prescriptions and post $59 billion in annual sales.

In fact, the generic market has been growing faster than the brand name drug market. This explosive growth has brought with it increased stature and influence. And the generic drug industry is not shy about flexing its newfound muscle in legal and legislative arenas.

Drug innovators can spend 15 years and more than $1 billion discovering, developing, testing, and bringing a successful drug to market. In return for this tremendous investment, pharmaceutical companies are given a patent, generally for 20 years, during which they alone can sell the drug.

This exclusivity period often includes the years spent in research and development, so drug companies don’t have very long to recoup their investment. And once a patent expires, generic drug makers are able to offer their version of popular drugs.

Not saddled with massive R&D expenses, generic companies can offer the drug at a fraction of the cost of the original, allowing them to quickly gobble up the market share.

Currently, the first generic manufacturer to win government approval can market their version of the drug without competition for six months. Often, the original drug innovator creates its own generic, called an “authorized generic,” and wins this brief exclusive marketing period.

The bill currently before Congress will outlaw authorized generics, paving the way for generic-only companies to move their version to market more quickly.

Proponents say this will lower prices for the generics, but the evidence suggests otherwise.

Historical data demonstrate that authorized generics are usually introduced to the market at a 50 percent discount. Straight generics, on the other hand, are introduced at a 30 percent discount.

In addition, once the six-month exclusivity period is up, the market is open to all generics, and the more there are, the lower the prices for consumers. Arbitrarily banning one of those generics is not only unfair to consumers, it also creates a disincentive for drug innovators to invent new cures.

The development of new drugs is a risky and expensive process, so anything the government does to obstruct companies from recouping their investment tends to have a chilling effect on drug innovation.

Which is why a recent decision by the California Supreme Court in the case of Conte v. Wyeth is so troubling.

The plaintiff, Ms. Conte, became quite ill after taking a generic heartburn medication prescribed by her physician. Conte not only sued the generic manufacturer, but also Wyeth, the company that made the original brand name drug, even though she never ingested any medicine made by Wyeth.

Because her physician admitted he had not read the warning labels for the generic drug he prescribed, but rather relied on the Wyeth warnings he had been exposed to decades earlier, Wyeth was found liable for Conte’s injuries.

Pushing the bounds of common sense even further, the generic manufacturer has been excused from the case entirely. Why? Because even though they made the actual product that harmed Conte, the physician hadn’t read their warning label.

This case sets a potentially disastrous precedent. In addition to doing all the research, development, testing, trials, and advertising for new drugs, innovators must also assume the legal liability for their competitors when they someday market a generic version of the drug.

In our already-litigious society, it is difficult to imagine a greater deterrent to developing new medications.

Generic drugs are widely trusted by Americans, as they should be. But however safe their products are, the policies the generic industry is pushing are anything but. They threaten to eliminate competition, drive up prices, and stifle innovation -- all prescriptions for catastrophe.

Peter Pitts is president of the Center for Medicine in the Public Interest and a former FDA associate commissioner.