David's New Book

Thursday, September 18, 2014

PhRMA - Good and Not So Much

Two recent articles caught my eye.  Neither had anything to do with antibiotics per se – but both are relevant to the pharmaceutical industry overall.  When I was at Wyeth, the product champions – frequently both scientists and marketing folks, the chemists and the finance people – would spend countless hours wringing their hands over the approaching patent cliff for their favorite product. Yes, its true.  When your exclusive rights expire – which actually usually occurs some years after your patent expires - the road is open to generic companies.  Revenues for the branded product can then be expected to drop at least 70% in the first year of generic competition and much more after that. This system seems fair to me – as a company you get to make up for your development costs and provide a return on your investment to your shareholders within the time frame of your exclusive rights.  After that – you’re done and consumers can still benefit from your miraculous (or not) product at a much lower price (hopefully).

But this system has been twisted and subverted such that there are myriad ways to avoid the loss of your precious revenues even after 15 years or more of exclusive sales around the world. One of the most egregious tricks is to legally collude with the generics companies to keep them from entering the market.  I don’t pretend to understand the legalities here – but it is very common for Pharma companies to reach an “agreement” (read money) with generics manufacturers to delay their entry into your market. 

One trick that I was not really aware of but that I just learned about after reading an article in the New York Times is drug hopping.  In this scenario, a rather common tactic of formulating your drug in some new way and then patenting your new formulation is taken to extremes.  The idea is, for example, to take your drug that is normally taken two or three times a day and to repackage it in a way that allows you get the same drug effect with a once-a-day pill.  Scientifically this is challenging and can give you an advantage over the generics when your patent on the drug itself expires.  You now have a new patent on the once-a-day formulation and can still sell that at a higher price than the generics since they cannot copy your new formulation. But in the case of Forest (now Actavis), prior to their loss of market exclusivity, they actually stopped selling the older version of the drug – Namenda – used for Alzhemier’s disease.  This forced all current users to switch to the new formulation.  This way, when the generic versions of Namenda come out, everyone will be on the once-a-day version and will be more reluctant to switch to a twice- or three-times-a-day version that the generics would provide. This tactic is called drug hopping.  Forest-Actavis is the subject of a lawsuit by the State of New York over this practice.
On the other side of the coin, Gilead is showing us how we should all behave.  My idol as a pharmaceutical company CEO is Roy Vagelos and Merck during the heyday 1980s and early 90s. Dr. Vagelos is a physician-scientist who rose to become the leader of one of the greatest expansions of a pharmaceutical company in history.  He also led a company-based philanthropic effort to deliver a Merck product (Ivermectin) to areas of the world ravaged by river blindness in a remarkably successful effort to all but eradicate the disease.
Today, Gilead has announced that they have reached an agreement with India and six other developing countries to market Sovaldi, their remarkable new anti-Hepatitis C drug that sells for $80,000 per 3 month course of therapy here in the US at a price of les than $1800 for a 6 month treatment course.  This turns out to be a 100-fold difference in price per pill. The Indian versions of the drug could ultimately reach 91 countries around the world offering help to the 100 million or more infected individuals in those countries.  The move also forces generic manufacturers in India – where a patent for Sovaldi is unlikely to be granted in any case - to charge an even lower price.  Gilead, in this way, will appeal to the growing middle class in India and other developing nations who can better afford branded treatments and who mistrust (with good cause) their home made generics. Gilead also will provide a humanitarian service and still provide a return on their investment to their stockholders.  Talk about win, win . . . .

So – compare and contrast – drug hopping by Forest-Actavis vs. low cost, effective, branded drugs for the developing world by Gilead . . .