What could be done to lower the cost of expensive generic drugs

[brickbacon]

@Ruken

There are, right now, multiple manufacturers of pyrimethamine tablets. Only one has FDA approval. If the others cannot sell their tablets legally in the United States, then it is illegal for them to sell them in the United States. It might not be in four years, but right now is not four years from now.

And? If the statement was that the reason X drug is expensive right now is because there are no approved alternatives, you’d have a point. Instead the statement was a broad, demonstrably false statement without the above qualifiers. Your point is also undercut by the fact that there is at least one approved alternative drug being sold as noted in this thread multiple time. Either way, debating this point is useless if you cannot see you are both wrong on the facts and the reality of the situation. The reason generic drugs are expensive is NOT because alternatives cannot or are not being sold.

@Ruken

Credentialism is a common means of decreasing competition. If it were ever so extreme as to restrict the legal providers of these services to one company, then yes, it would be illegal for anyone else to provide these services.

It’s not extreme by most measures, nor it is some scheme to protect monopolies as you suggest it is. Again, this issue about the FDA is a complete red herring. Here is one article explains the issue fairly well:

The majority of cases come down to two broad factors: reduced competition due to consolidation in the industry, and market and regulatory forces that altered incentives for firms producing generic drugs.

In a nutshell, it’s the bad side of capitalism where intense competition and lower profit margins lead to cost-cutting measures. Lean inventories, outsourcing production and manufacturer consolidation can allow the remaining firms to regain some market power and raise prices, sometimes precipitously. We’ve seen this pattern happen before in the airline and cable industries where highly competitive, deregulated markets led to consolidation and higher prices over time.

Notice how little there is about the FDA and delays? Notice the analogue between drugs and the cable industry (as I noted earlier as well). Has competition lowered your cell phone bill in recent years?

Yes, FDA delays are an obvious problem, but the issue is largely market based. Skip ahead to the part about competition:

Firms usually file applications to produce a generic drug before the patent expires. This means that the generic firm can begin selling its product the first day the patent of the branded agent expires. A small number of firms typically enter the market in the first year after a patent expires, which means they can earn significant profits.

But those high profits encourage more manufacturers to start producing the generic drug. More manufacturers means more competition and this in turn makes profits decline. Tighter profit margins lead firms to cut costs, consolidate or perhaps even exit the market. Over time, only a few larger firms remain. How readily firms enter and exit the market and how quickly prices adjust varies considerably from drug to drug and across industries.

Recent consolidations in the generic drug market have reduced competition in some drug classes like antibiotics or medicine for asthma and diabetes, at a time when demand for low-cost medications is at an all-time high. This provides the leverage firms need to raise prices substantially. While there are many generic manufacturers operating in the US, three firms – Teva, Mylan, and Sandoz – have over 40% of the market.

And large research-oriented manufacturers like Pfizer and Novartis are buying smaller generic companies or directly producing generic versions of their own patented drugs, so-called branded generics. This creates a potential conflict of interest. For instance, if the firm has sufficient market power, it has an incentive to decrease generic production to shift demand to the more profitable branded product.

Tight profit margins lead firms to cut costs. Holding on to inventory is expensive and firms have to weigh the costs of storing additional supply against the loss of profit from a potential disruption in supply. As profit margins shrink, inventories tend to decline. In this environment interruptions in the supply chain, for whatever reason, have more immediate impact on retail prices at the pharmacy.

Again, as I stated a while back, competition cannot really fix these issues. We can lament the fact that X company cannot get some alternative approved, but those are not the issues driving this problem. No one wants to risk money in an uncertain market where the likely outcome is slim profits. Let’s just say for argument’s sake that the FDA could approve generics in 6 months. You decide to enter a market where one company has a de-facto monopoly, and has raised prices considerably. If you know you cannot compete profitably at the former price, why would you enter it knowing you have a good chance of losing money? And as far as patients go, if you do enter and manage to only depress prices slightly, how are they better off?

[Hari_Seldon]

I put this in another forum (Mundaine…, whatever), but my wife just got a prescription for a generic drug (nystatin) in the US that cost nearly CA$60 and then got it renewed here for $12. It is of course illegal to import from Canada. I once overheard a border patrol officer tell someone (in the next seat in a train crossing the border) that he would confiscate any drugs anyone had, even if they were in small quantities for personal use because it was illegal to import drugs from Canada. When he asked me if I had any drugs with me, I lied.

When congress passed Bush’s prescription drug plan, the act specified that the government was not allowed to negotiate on price but must pay list for any drug. Of course, congress is simply looking out for their true constituents: their campaign contributors.

[boffking]

A lot of the abuse comes in the form of one company buying out another to take over it’s patents. I think in this scenario, the patents should be returned to the individuals who invented the drug, not the company’s New ownership.

[Ruken]

@boffking

A lot of the abuse comes in the form of one company buying out another to take over it’s patents. I think in this scenario, the patents should be returned to the individuals who invented the drug, not the company’s New ownership.

The thread is about generic drug prices; patents aren’t typically an issue.

[Eva_Luna]

@Hari_Seldon

It is of course illegal to import from Canada. I once overheard a border patrol officer tell someone (in the next seat in a train crossing the border) that he would confiscate any drugs anyone had, even if they were in small quantities for personal use because it was illegal to import drugs from Canada. When he asked me if I had any drugs with me, I lied.

Well, then he didn’t know his own agency’s regulations, but IME that’s not exactly unusual. What, people entering the U.S. who require prescription medication are supposed to find a doctor and refill everything the moment they arrive? That would be insane.