NCPA - National Center for Policy Analysis

Drug Companies' New Products Counter Generics

November 18, 1998

In 1984, Congress passed legislation to smooth the way for fast marketing approval of low-cost generic drugs in order to reduce inflation of pharmaceutical prices. Observers are asking why drug costs are higher than ever.

Generic or brand-X drugs have the same chemical composition as patented, name brand drugs, but are made by competing companies when the original manufacturer's patent expires.

  • Generics have grown from 18 percent to 42 percent of all prescriptions written in the United States.
  • But innovative drug companies are heavily marketing new, brand-name drugs directly to consumers, with an estimated $10.8 billion in advertising this year alone.
  • Although the Food and Drug Administration says the vast majority of generics are substitutable for the brand drug in all medical cases, the use of generic substitutes is falling in a number of instances.
  • For example, Value Rx, a drug-benefits manager for 7.2 million people, says the use of the generic substitute for a particular gastrointestinal drug has fallen from 41 percent to 19 percent over the past four years.

FDA regulators say the pharmaceutical research companies that originate the patented drugs use legal tactics to keep generics off the market, such as disputing claims they are clinically the same and discouraging doctors from prescribing them. For instance, they have lawyers file "citizens' petitions" with the FDA opposing approval of the generic drugs. And DuPont Pharmaceuticals Inc. is pursing either legislation or agency action in as many as 20 states to prohibit pharmacists from substituting a generic equivalent for its anticoagulant, Coumadin, without first getting a doctor's verbal approval.

Source: Thomas M. Burton, "Why Generic Drugs Often Can't Compete Against Brand Names," Wall Street Journal, November 18, 1998.


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