Generic Drugs, Sooner?

Generic drugs — those with the same active ingredient as a brand-name drug, manufactured after that drug’s patent has expired — have long been touted as a way to achieve lower health-care costs, both directly for individuals and broadly for the health-care system. Generics are typically significantly cheaper than their brand-name counterparts, even though the competition they offer usually forces down the price of the brand-name drug as well. Because of this price difference — and because often a generic drug exists to treat the same condition as a different, still patented brand-name drug — health insurance plans, both private and public, typically offer lower co-pays for generics in their prescription drug coverage. Choosing generics thus usually leads to lower out-of-pocket costs for patients, as well as lower costs for the insurance provider — resulting, at least in theory, in lower private-insurance premiums.


Developing a new drug requires, of course, an enormous investment of time and money to ensure safety and efficacy. That is why new drugs are granted patent protection, giving pharmaceutical companies a period of years in which no one else may manufacture or sell the drug — letting them charge higher prices than if they had competition. But how long should this period be? New-drug manufacturers argue that the longer a company enjoys the exclusive right to manufacture a drug, the greater incentive it has to invest in expensive, innovative research that may lead to a breakthrough treatment. Generic manufacturers argue, in turn, that longer exclusive rights often give the original manufacturer windfall profits, and that competition helps consumers in the form of lower prices.

Last week, President Obama weighed in on the issue in his 2012 budget proposal. In a bid to lower the federal government’s health-care costs — and in the process also offer more generic options to people with private insurance or who pay for their drugs out-of-pocket — he proposed shortening the period of exclusivity for manufacturers of new biologic drugs from 12 to 7 years. Biologics are drugs composed of proteins, the building blocks of hormones and other active substances within the body. These drugs are usually more complex to develop and manufacture than traditional drugs, which consist of chemicals with much smaller molecules that tend to be more stable; biologics often require refrigeration to prevent deterioration. Biologic drugs include insulin and other injectable drugs for diabetes, such as exenatide (brand name Byetta) and liraglutide (brand name Victoza).

According to a Reuters article, the White House estimates that shortening the exclusivity period for biologics to seven years would save the federal government $80 million starting in 2015 and eventually $2.3 billion for the ten-year period of 2012 through 2021, by reducing costs within its Medicare and Medicaid programs. The greater availability of generic drugs resulting from such a change would, of course, also affect people who get their prescription drugs from a source not funded by the federal government. Not surprisingly, Obama’s proposal was criticized by the Pharmaceutical Research and Manufacturers of America as well as by the Biotechnology Industry Organization, both of which argued that the change would stifle new drug development. The proposal was praised, in turn, by the Generic Pharmaceutical Association.

What do you think — does President Obama’s proposal make sense? What outcomes should lawmakers seek when they set the length of patent protection for new drugs? Are you more concerned by the price of prescription drugs or by the prospect of stifling innovative new drugs and treatments? Is there a balance to be struck — and if so, where? Leave a comment below!

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  • Anonymous

    Let’s look at the facts, rather than the PR from PhRMA and BIO, two organizations that collectively spent BILLIONS on lobbyists last year to get what they wanted from Congress, including a 12-year exclusivity period on biologics above any patent protection they enjoy on the same molecules. As for the excuse that it takes millions of dollars to develop a new drug, to that we should be asking if biologics are entitled to lengthier exclusivity than small-molecule (chemical) drugs? After all, both go through the FDA for approval and the costs are comparable for both. In fact, many drug companies sell both small-molecule drugs AND biologic medicines. Finally, the 12-year deal that the biotech industry gained from the healthcare bill that was signed into law was thanks largely to former Sen. Ted Kennedy (whose state has one of the highest concentrations of biotechnology firms in the nation) and Rep. Anna Eshoo, whose Silicon Valley home district in California is similarly dense in biotech firms, in spite of the fact that Rep. Henry Waxman from Southern California wanted only 7-years exclusivity.

    Finally, as for the argument that the change would stifle new drug development, one has to question that considering that the industry did not enjoy 12 years exclusivity until this legislation passed, and yet there was continued investment in the field. Also, small-molecule drugs don’t enjoy the same lengthy exclusivity period, yet firms are spending billions developing new small-molecule drugs too, so this claim is unsubstantiated by evidence.

    President Obama’s proposal brings some sanity to a segment of the law that had otherwise been a big gift to the drug/biotech industry. But taxpayers were being screwed.

  • Heartha Whitlow

    Earlier genetics would help bring down costs, but would make testing more iffy.
    I think this decision would be better if we take a look at how much profit the pharmacetical companies are making.

  • John D. Corrick

    To which I say Yes, Yes!

  • Mark 41

    Nations that squeeze profits out of Pharma have no Pharma R&D, but rather rip us all off by illegally copying patented drugs. Rather than follow their example, we should be finding ways to fine those other nations so that our own Pharma costs are not so elevated by their cheating.

  • John Durham

    There are those of us who cannot purchase certain drugs because we pay out of pocket. I am quite sure that researchers can recoup their investments many times over during a shorter “protection” period. They will not lose, sick patients will definitely lose. If a sick farmer has to go without medication because he can’t afford it, then the farmers should charge those pharmaceutical investors likewise in order to eat. After all, farmers also invest and take risks! I am not saying that companies should not be rewarded for their efforts, but sick people should not pay the price. There has to be some more equitable way for all involved. Maybe if a fair market value for the medications were arrived at by a third party then exclusivity could be extended to the original developers without hurting those who need the medications the most.

  • Mark 41

    I pay out-of-pocket 100% and have done since Type-2 diagnosis.

    While it would be nice to get everything for free to treat it, including the test strips, I don’t expect someone else to pay for my problems.

    The healthiest and highest quality foods are great too, but they are also far more expensive. One might just as well argue that perfect food is a right since that might head off a large proportion of disease that eventually develops.

    People need to pay their own bills and stop demanding that everyone else take care of them like parents.

  • Mark 41

    As for a third party fixing prices, that is found only in totalitarian situations that drive away innovation. Price-fixing would be the end of pharma innovation.