What’s in a drug’s name?
FEW CHANGES WOULD DO MORE to reduce healthcare costs quickly than making generic medications more widely available. Which is why bad news for Bristol-Myers Squibb could be good news for everyone else.
Late last month, federal investigators raided the drug giant’s New York offices looking for evidence that it had struck an illegal deal with a competitor to delay the launch of a generic version of the world’s second-bestselling drug. On Tuesday, that competitor announced that it planned to start selling the drug anyway. Shares of Bristol-Myers fell almost 7% on the news.
Drug manufacturers such as Bristol-Myers have been under increasing financial pressure in recent years as some of their most profitable drugs lose patent protection. (Generally, a drug is protected from competition for about 14 years.) But research and development of new drugs is a slow process, so some drug makers try to stifle competition. They have been known to file suits against a generic manufacturer as soon as it hints at entering the market.
Lately, however, brand-name companies have turned to a simpler ploy: paying makers of generic drugs up to tens of millions of dollars to go away.
Such deals may well be legal. But they also distort healthcare costs and the drug market generally. To entice smaller drug makers to introduce competing medications, the Food and Drug Administration gives the first generic company that gets FDA approval the right to market its drug for 180 days without competition from other makers of generics. Yet brand-name manufacturers realized a few years ago that if they pay that initial competitor not to introduce its drug, they can effectively keep all generics from entering the market.
The Federal Trade Commission and the Department of Justice, which jointly enforce federal antitrust laws, have rightly decided several of these deals may be anti-competitive, and the agencies have brought several antitrust suits to court. But the rulings have been inconsistent.
In the ensuing confusion, many brand-name drug makers have continued to make deals with makers of generics to keep the cheaper drugs off the market. With Bristol-Myers, the company and another partner reportedly agreed to pay a Canadian drug maker $40 million to delay the release of a generic version of the blood thinner Plavix, which accounts for about $4 billion in annual sales in the United States. Federal investigators have opened both civil and criminal investigations into the deal.
Bristol-Myers says it has done nothing wrong, and the investigation may bear that out. But if what happened in New York last month and Tuesday helps more generic drugs get on pharmacy shelves, that’s good news.
