# 514

July 2004

Spurring Lower Prices: FDA Aided America's Rx Drug Consumers By Not Banning Authorized Generics

by David W. Almasi

For years, generic drug manufacturers have been telling us that making more generic drugs available - earlier - is the key to saving consumers money and bringing greater access to prescription drugs.

Competition, they said, will benefit millions of Americans because prices for prescription medications will drop if consumers have access to more generic versions of the medicines research pharmaceutical companies discover and develop.

But now generic manufacturers are backpedaling on the issue and, like Goldilocks' selfish search for something to suit her "just right," the generic industry is rejecting the very competition they once told us was the Holy Grail.

Thus far, competition has been very, very good to the generic industry. Today, their share of the pharmaceutical market is nearly 50 percent - and even higher for the top-selling medicines that generic drug makers choose to copy. Nearly 100 percent of the top selling drugs whose patents have expired have generic competitors.

But it looks like generic drug makers believe in competition only when they are the ones the introducing competition into the market. They object when the research companies that originally develop new medicines try to do the same - despite the obvious and measurable benefit to consumers.

There is nothing new about research pharmaceutical companies producing generic drugs; many have subsidiaries that manufacture and market generics as well as their original brand-name medicines; some even make generic versions of their own drugs.

Today, a number of research pharmaceutical companies, seeing the need to provide lower-cost alternatives, are beginning to partner with generic manufacturers to develop "authorized generic" versions of the drugs the research company originally discovered. It's a way to get more medicines to patients at lower prices.

Under these partnerships, a generic version of the research company's medicine is either made by the company itself or made under a license granted to its generic partner. Like other generic equivalents, this new "authorized generic" is then marketed and sold for less than the original medicine of which it is a copy.

An "authorized generic" can come into the market very quickly to provide consumers with lower prices because the know-how of the medicine's original developers can be quickly and efficiently transferred.

It can be brought to market near the end of an original medicine's patent, which is essentially identical to the way generic drug makers have introduced their copies for years. It also can be introduced at the same time as the first generic manufacturer brings its copy to market.

Either way, the competition should be welcome because it serves the needs of consumers. The original brand-name medicine now faces two competitors - the "authorized generic" and the copy made by the first traditional generic drug maker who enters the market. Because consumers now have more choices, all of the drug companies are forced to price their products lower to stay competitive. This can only benefit consumers.

Even though "authorized generics" are just like any other generics - a less expensive alternative to the original medicine - some generic drug companies, including Mylan Laboratories and the Generic Pharmaceutical Association, are against the practice of "authorized generics" and are determined to fight for its elimination. They say the tactic will reduce the number of generic drugs that come to market, decrease profitability of generic drug makers, and limit the viability of their industry.

The U.S. Food and Drug Administration (FDA) along with the research companies that originate medicines and several other generic drug makers disagree - as they should. In fact, the FDA earlier this month went so far as to formally reject requests from Mylan and another generic producer, Teva Pharmaceutical, to prohibit authorized generics.

In doing so, it cast a strong vote in favor of America's consumers.

Competition, after all, has always fueled our economy. It encourages lower pricing, more innovation, and better quality. Because of competition, companies strive to improve their products or services and to attract and retain their customer base.

Competitive forces have driven growth in the pharmaceutical industry by providing incentives for research-based pharmaceuticals to develop new and better drugs for the patients who need them and enabling generic drug makers to make more copies of those drugs available - sooner.

Just as the rise of generic drugs increased competition in the past, the emergence of "authorized generics" today is a way to deliver access to medicines more cost effectively.

Restricting authorized generics will only benefit generic drug makers intent on producing a copy they want to protect from competition. We should not allow generic companies to pick and choose what kind of competition in the marketplace is available to consumers. The market - not special interests - should be allowed to determine how much competition is "just right."

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David Almasi is executive director of The National Center for Public Policy Research. Comments may be sent to [email protected]