Ultra-cheap drugs worry generic makers

AP via yahoo ^ | 6/21/06 | THERESA AGOVINO

[paudio]

NEW YORK - It's a novel approach in the long battle between brand name drugs and their generic rivals: Merck & Co. is slashing the price of its cholesterol drug Zocor so low for one insurance plan that members will actually pay less for the original pills than for the generic.

That tactic has some consumer advocates fearing the practice will spark a movement among Big Pharma, compounding other pressures they fear will weaken the generic industry and compromise the country's source of low-cost drugs.

Under the deal, members of UnitedHealth Group Inc. will pay around $10 for a month's supply of brand name Zocor and $40 for a generic after the drug loses patent protection on Friday. Both Merck and UnitedHealth say the arrangement demonstrates how market competition drives down costs, and that's good for patients.

Consumer advocates typically cheer lower prices but in this instance they worry that a short term benefit for patients will ultimately result in long term problems. They say moves such as Merck's undermine generic companies' chances to generate the profits that fuel their ability to conduct research and challenge drug company patents — eventually resulting in fewer cheap medicines.

[BlazingArizona]

Competition is alive and well in pharmaceuticals so the conspiracy to protect their monopoly isn't working out too well. Just look at drug company PE's and you'll find out the sad story. The belief that they make obscene profits cannot be substantiated by their financials.

Socialists use the term 'monopoly' to describe any situation of high profits or simply being the largest company in a given field, like Wal-Mart. Actually, neither of these factors has anything to do with being a real monopoly. A monopoly exists when there is some physical or legal reason why it is not possible to compete with the monopolist.

Pharma companies have created a monopoly by getting laws passed preventing consumers from shopping around in other countries for good deals on drugs. You can buy apples from Chile in any supermarket, but you can't legally send away to Switzerland to get your prescriptions filled on their open market. THAT is what makes pharma a monopoly.

[redgolum]

Because, for some reason one of the few industries with any type of import protection is pharmaceuticals. Prescription drugs are cheaper just about everywhere else.

What is funny is that the excuse is "Well, the US has to pay for the research", when most of the R&D is now going on in Asia. A lot of the cost of prescription drugs in the US has more to do with advertising.

[Pericles_Parnassus]

I like your post. But sadly, that's precisely what the medical profession has already realized. My brother is a physician, and his prices are decided and FIXED by the Government... have been for years.

The drug companies will be next. That's what happens after the government gets involved i.e. the Gov Prescription Plan is just the start...

[Pericles_Parnassus]

Close, but the motive I see is actually a move in reaction to the new Government Prescription Plan. In order to get their drug used, they have agreed to lower the price (deal) or they get nothing.

Same thing happened when the Government got "involved" with health-care: Medicare and Medicaid. Doctors agreed to accepting much (much, much, much) lower payments for their services so they could get paid something (anything) for their services. This is why many doctors are now NOT accepting Government Patients... because when you do, you have to accept the lower payments or face the consequences.

Fun, isn't it. Not so free anymore. Liberty is dying, and we sit by and watch it die.

[lucysmom]

All the promising new drugs are coming from private industry.

Really?

According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995.

But it seems that as the size of pharmaceutical companies has grown, even with a substantial amount of research conducted and paid for by tax dollars, they have become risk adverse.

The trend of mergers in the pharmaceutical industry has generated huge Big Pharma companies requiring large incomes for their costly operations. Despite enormous investments in drug discovery and drug development, fewer completely new drugs are entering the market. Most “new” products are instead variations of “old” drugs already on the market. In the mid-nineties, there was a peak in the number of new drug applications being approved by the FDA, but since then the numbers have decreased.

When companies begin recycling old products in new packages, it would seem they are experiencing a loss of creativity.

It would be impossible to trace the amount of tax dollars that line the pockets of drug companies. Much research in conducted in universities, domestic and worldwide, that receive public funding, add to research that is carried out by government entities like NIH. Then there are the tax breaks/incentives given to drug companies plus tax money that pays the consumer cost of prescriptions through various programs.

How much tax money is spent worldwide providing drugs to those who can't pay? The "free market" drug industry could not survive without feeding at the government trough. No doubt that's why they spend hundreds of millions of dollars a year lobbying government for more and more handouts.

In the mean time, big pharma spends more on advertising than on R&D.

[lucysmom]

Fortunately for more rational people, China has not proven it can innovate much of anything, much less something as sophisticated as pharmaceuticals. They may one day be a player in the generic business but they are a very long way from establishing a pipeline of innovation. You and I will not see a Chinese based R&D industry in our lifetime. The infrastructure required to do so is not something the Chinese, or anyone else, will be able to create in the foreseeable future.

And yet impoverished Cuba with 11 million people operating under boycott, holds 400 patents in the biotech field.

I am not advocating Communism as an ideal system to foster creativity, however neither is a system that places so much empathizes on profit that it becomes risk adverse.

The Chinese understand the free market, globalization, and capitalism very well. Anyone who thinks China will not challenge us economically is seriously mistaken.

[Mase]

Pharma companies have created a monopoly by getting laws passed preventing consumers from shopping around in other countries for good deals on drugs.

You and I define monopoly very differently. As a matter of fact, I think you'd be hard pressed to find many others who define the term in the same manner you do. Good deals are available in other countries simply because the drug companies are forced to sell their products in those countries under strict price controls. This creates a false economy - not an open market as you suggest - and is in no way akin to buying apples from Chile in any supermarket.

In almost all of the agreements that these parasitic countries sign with the drug companies, they agree not to resell the drugs to other countries. This portion of the agreement is never enforced so it is very understandable why the drug makers are upset and lobby congress for assistance. The bad guys here are the nanny states who get to enjoy the many benefits the pharmaceutical companies provide while demanding that others pay for it. How you can misconstrue this situation into somehow creating a monopoly for the drug makers is a mystery.

[BlazingArizona]

In almost all of the agreements that these parasitic countries sign with the drug companies, they agree not to resell the drugs to other countries. This portion of the agreement is never enforced so it is very understandable why the drug makers are upset and lobby congress for assistance.

A great many companies price differentially in different countries, simply because what the traffic will bear differs from one country to another. You will sometimes see American textbooks appearing in discount bookstores, marked "For sale in Canada only", because that condition was a part of the sales deal between the American publisher and a Canadian distributor. If the textbook printer sees that too many books are "leaking" back to the US market in this manner, his recourse is simply to stop selling to the Canadians. The Canadian distributor would then lose that particular chunk of US trade.

What's different about the drug companies is they, and they alone, get US government help in enforcing their sales agreements in foreign countries. It's specifically illegal in the US to have your prescriptions filled in other countries. The US will look the other way for such leaks as personal purchases by Americans who physically travel to Mexico and get scripts filled on the border. But everyone knows that there can be a crackdown at any time, as there recently has been on purchases from Canadian pharmacies.

You seem to feel that pharma companies have some sort of special moral right in making Americans bend over and take this monopoly pricing scheme. I don't, and I take great pride in dealing with your "parasitic countries" whenever I can. Mexico is less than a day's drive from my place, and New Zealand is becoming the "new Canada" on the Internet. In an era when they can send my job to India whenever they feel like it, why don't I have the same right to outsource my prescription purchases?

I suggest you call your doctor and have him cancel your prescription for Kool-Aid, pronto.

[Mase]

Because, for some reason one of the few industries with any type of import protection is pharmaceuticals

I guess you've never considered the import restrictions and price supports on Agricultural products. Drug makers are forced to sell their drugs at steep discounts by other countries and in turn for this, the countries agree not to allow these drugs to be re-imported. Of course, these countries have broken their agreements. Why some here don't think these countries should be forced to uphold the agreements they sign is beyond me.

when most of the R&D is now going on in Asia.

This article makes clear that almost ninety percent of the world's supply of new drugs are discovered right here in the US. Asia is a long way from being able to provide the infrastructure necessary in chemistry, physics and instrument analysis. They also don't have the university system, hospitals, doctors and educated work force required for a successful R&D industry. Finally, most Asian nations practice price controls and do not offer the tax benefits and intellectual property protections that the US does. There is a reason countries with price controls don't produce new drugs. The vast majority of drug innovation occurs here and that's not going to change any time soon.

A lot of the cost of prescription drugs in the US has more to do with advertising.

You should probably spend a little time looking at drug company financials. Pharmaceutical companies spend more than 20% of gross revenue on research and development. The average spent in R&D for all industries is just 4%. Of course, we could have government tell the drug companies how they can advertise and what they can spend. That would be a conservative thing to do. Could you imagine Reagan offering that as a solution instead of demanding that the nanny states who benefit at our expense end their price controls?

If all drug advertising was reduced or ended completely, you'd have to rely on your doctor for all the information you need to know about what treatments are available to you. And we all know that doctors are motivated solely by what's in your best interest. LOL

[TASMANIANRED]

The Pharmaceutical and Oil Industry and the Military are most favorite institutions/Industries to bash.

One is responsible for raising the life expectancy from 49 at the turn of the 20th century to 79 at the turn of the 21st.

One has changed the world economy from horse drawn, candle lit to air conditioned and mobile.

The Last, freed about 2 Billion people from totalitarianism.

Interesting that the most productive are the most vilified.

[Mase]

Really?

Yes, really.

According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995.

Without any involvement from private industry at all? Are they including scientists associated with universities? How did they arrive at that percentage? What was their success rate in other years?

Total NIH money spent for all healthcare research projects -not just pharmaceuticals - will total less than $15 billion this year. Conversely, American Pharmaceutical companies will invest more than $30 billion this year on R&D just for drugs.

When companies begin recycling old products in new packages, it would seem they are experiencing a loss of creativity.

And you're sure this is all they're doing? How do you know so much about the focus of their R&D? Get the last issue of Forbes and read about the challenges we face with drug resistant bacteria. Some of the most promising antibiotics are coming from reformulated products already in existence. A simple reformulation of Prilosec into Nexium allowed the drug to repair damage caused by acid reflux. There is no excuse for your level of cynicism.

It would be impossible to trace the amount of tax dollars that line the pockets of drug companies. Much research in conducted in universities, domestic and worldwide, that receive public funding, add to research that is carried out by government entities like NIH. Then there are the tax breaks/incentives given to drug companies plus tax money that pays the consumer cost of prescriptions through various programs

The United States produces nearly 90 percent of the world's supply of new pharmaceuticals. Half of all medical treatments in use today were developed in the last 25 years. Yeah, those results are terrible. Maybe, someday, they'll develop something for the acute cynical nature syndrome you seem to be suffering from.

How much tax money is spent worldwide providing drugs to those who can't pay?

Ok, how much?

The "free market" drug industry could not survive without feeding at the government trough

They derive nothing from their $30 billion annual investment in R&D? LOL!

No doubt that's why they spend hundreds of millions of dollars a year lobbying government for more and more handouts.

What handouts are those? How much of the NIH budget goes directly to the drug companies? Drug companies must make great investments with all that government largess. Can you prove it by showing us their net profit as a % of revenue compare to other industries, or in their earnings multiples?

In the mean time, big pharma spends more on advertising than on R&D.

That's funny coming from someone who has no clue about how much they spend on R&D. Like I said, hopefully they're allocating resources to find a cure for your chronic pessimism condition.

[Mase]

And yet impoverished Cuba with 11 million people operating under boycott, holds 400 patents in the biotech field.

Do you understand the difference between obtaining a patent and commercializing a product? Anyone can do the former.

however neither is a system that places so much empathizes on profit

Where do you think the money comes from to develop wonder drugs? Deny the profit motive and you deny innovation. In a free economy, the pursuit of profits and serving the people are one in the same. You may as well come out and say that you believe it's their responsibility to the state to produce innovative drugs that save and improve our lives . What was the last life saving drug that came out of the Soviet Union? Do you even grasp why 90-percent of all new drugs are developed here?

that it becomes risk adverse.

Are you trying to assert that the industry is risk averse? Good grief, that's just ludicrous. From post #41:

To develop a new drug is time-consuming, expensive and risky. It takes 12-15 years on average [patent protection normally lasts just 17 years], costs about $500 million, and only one of every 5,000-10,000 new compounds discovered in the laboratory ever makes it to market as a new drug."

About 400 cancer drugs from 178 companies are in clinical trials, according to the Pharmaceutical Research and Manufacturers Association. That is twice the number of drugs in trials for illnesses like Alzheimer's disease and depression and nearly three times as many as for heart attack and stroke.

New Drugs for Cancer Could Soon Flood Market

Yeah, right. They're risk averse.

The Chinese understand the free market, globalization, and capitalism very well. Anyone who thinks China will not challenge us economically is seriously mistaken.

They may challenge us economically but their leadership doesn't understand the free-market or capitalism very well at all. One thing is for sure, it will be a long time before they have what it takes to create and commercialize new classes of drugs.

[lucysmom]

Total NIH money spent for all healthcare research projects -not just pharmaceuticals - will total less than $15 billion this year.

Oh?

The FY 2005 budget request of $28.8 billion for the NIH is an increase of $729 million (2.6 percent). Of this total, 97 percent or $27.9 billion is classified as R&D; the remainder is for training and research, management and support (RMS).

Taxol is a case of a drug that was developed with tax money while profits were privatized.

Angell disputes the industry’s reputation as an “engine of innovation,” arguing that the top U.S. drug makers spend 2.5 times as much on marketing and administration as they do on research. At least a third of the drugs marketed by industry leaders were discovered by universities or small biotech companies, writes Angell, but they’re sold to the public at inflated prices. She cites Taxol, the cancer drug discovered by the National Institutes of Health, but sold by Bristol-Myers Squibb for $20,000 a year, reportedly 20 times the manufacturing cost. The company agreed to pay the NIH only 0.5 percent in royalties for the drug.

And you're sure this [recycling old products in new packages] is all they're doing? How do you know so much about the focus of their R&D?

Well, here are the results.

>Of the seventy-eight drugs approved by the FDA in 2002, only seventeen contained new active ingredients, and only seven of these were classified by the FDA as improvements over older drugs. The other seventy-one drugs approved that year were variations of old drugs or deemed no better than drugs already on the market. In other words, they were me-too drugs. Seven of seventy-eight is not much of a yield. Furthermore, of those seven, not one came from a major US drug company. (US Food and Drug Administration)

Some of the most promising antibiotics are coming from reformulated products already in existence. A simple reformulation of Prilosec into Nexium allowed the drug to repair damage caused by acid reflux.

Interesting you should mention Prilosec. It was developed in Sweden, by the Swedish company, Astra, which has since merged to become Astra-Zeneca.

But Nexium didn't bring a new antibiotic on the market, it simply combined and antibiotic with Prilosec.

Prilosec maker Astra-Zeneca, which filed multiple lawsuits against generic drug makers to prevent them from entering the market when the company’s exclusive marketing rights expired. The company “obtained a patent on the idea of combining Prilosec with antibiotics, then argued that a generic drug would infringe on that patent because doctors might prescribe it with an antibiotic.”

Even you must admit that the possibility of a doctor prescribing a generic version of Prilosec with an antibiotic, is hardly a patent rights issue.

But that brings us to still another issue - lawsuits. Drug companies LOVE to sue eachother.

The United States produces nearly 90 percent of the world's supply of new pharmaceuticals. Half of all medical treatments in use today were developed in the last 25 years.

Prove it. Some companies that you assume are American, are not. (I can assert that with confidence because of the statement above)

[A. Pole]

One is responsible for raising the life expectancy from 49 at the turn of the 20th century to 79 at the turn of the 21st.

How do you explain the fact that American life expectancy lags behind other developed countries? I know what you can say - it is because USA subsidizes the medical care in these countries :)

[lucysmom]

Do you understand the difference between obtaining a patent and commercializing a product? Anyone can do the former.

Well, yes I do. I have 20 years experience, some of it with pharmaceutical companies.

Deny the profit motive and you deny innovation.

DeVinci was a pretty innovative guy and yet profited little from his research. What drove him? Nicola Tessla was one of the greatest minds of the last century and responsible for many of the inventions and discoveries that make our life, as we know it today, possible. I doubt GE would be where it is without him. He died in poverty.

Where profit is the motivating force, mediocrity reigns. Without a passion for discovery that is separate from profit, there is no innovation.

But the profit motive has a role to play too. The innovators are motivated by passion, the venture capitalists, by profits and perhaps a will to do good in the world; each has their part to play. When passion, profits, and altruism exist in balance, the context exists for maximum innovation and development.

They [China] may challenge us economically but their leadership doesn't understand the free-market or capitalism very well at all. One thing is for sure, it will be a long time before they have what it takes to create and commercialize new classes of drugs.

As a boss I had years ago used to say, "hide and watch".

I heard a Chinese government official interviewed, and he understood capitalism and free markets VERY WELL. Well enough to lecture the interviewer, an American reporter specializing in economics, on the subject. Honestly, it was chilling.

Just because they don't buy the whole package doesn't mean they don't fully understand the concepts.

[A. Pole]

Where profit is the motivating force, mediocrity reigns.

Confucius said: "A gentleman takes as much trouble to discover what is right as lesser men takes to discover what will pay"

[ichabod1]

Everyone will be employed and nobody Everybody will be poor.

And we will pretend to work and they will pretend to pay us.

[lucysmom]

If all drug advertising was reduced or ended completely, you'd have to rely on your doctor for all the information you need to know about what treatments are available to you. And we all know that doctors are motivated solely by what's in your best interest. LOL

Back in the old days, before drug companies were allowed to advertise outside of medical journals, they marketed to doctors much as lobbyists do politicians today. That was an issue way back then.

You mention in another post drug resistant strains of bacteria; self prescribing patients insisting their doctor give them drugs has been a factor in that development.

Information on drugs has always been available to the consumer who is interested.

[lucysmom]

What was the last life saving drug that came out of the Soviet Union?

Not a drug, exactly, but a treatment with a bacteria specific virus called a phage.

From Wikipedia

Bacteriophages or "phage" are viruses that invade bacterial cells and, in the case of lytic phages, disrupt bacterial metabolism and cause the bacterium to lyse [destruct]. Phage Therapy is the therapeutic use of lytic bacteriophages to treat pathogenic bacterial infections. Phage therapy is an alternative to antibiotics, being developed for clinical use by many western research groups in Europe and the US. It has been extensively used and developed in the former Soviet Union.

The treatment is effective by using a phage virus to infect and kill specific bacteria whilst not interacting with the surrounding human tissue or other harmless bacteria. The virus replicates quickly so a single, small dose is usually sufficient.

Phages are currently being used therapeutically to treat bacterial infections that do not respond to conventional antibiotics.

[Toddsterpatriot]

The problem is MERC and others may not drop it low enough to make a profit, but so low that they are actually losing money in order to drive generics out of business

You have any proof they price it to lose money?

MERC can afford to lose money on one drug, while its still got large markups on others to cover it... generic producers may not have that ability.... and the end game of no generic drugs being available means eventually higher prices for everyone.

Who's forcing the generics to make the money losing drug? They'd avoid that drug and watch Merck lose money.