Thursday, October 13, 2011

Sometimes You Have to Wonder…

I found a note on one of the news aggregation sites, and tracked it back to the Wall Street Journal Online page about a drug company that is attempting to stall the introduction of a generic version of one of their inventions in the US market. This by itself isn’t all that unusual; under US law you can only patent a new drug for 17 years, and you’ll spend at least half of that (often three-quarters or more) just getting FDA approval to sell the product – which makes it worth your while to delay the onset of generics. Once your patent expires, anyone who can pass FDA standards can offer a generic version of your drug for whatever they feel like charging for it – which means that the price will come down dramatically and you will have no chance whatsoever of collecting the monopoly fees you have been charging for the product. But while it may be common to change the formulation slightly, or change the dosage per unit, or even acquire one of the critical sources for one or more of the ingredients (making the generic more expensive to produce), it’s rare for a company to just cut an additional line into a pill and claim that it’s a new version…

You can pick up the original story here if you want to, but the basic idea is that Warner Chilcott PLC is trying to delay the release of the generic form of their product (Doryx tablets) by releasing a version with two score marks on it (so that you can easily break it into three pieces) instead of the original one score line, and is claiming that this should be considered a new version. Naturally, the story is meeting with outrage from consumer advocates and vocal protests from people who have an interest (personal or political) in healthcare reform, but what strikes me isn’t that the company would try something this lame, or that the usual suspects would protest it, but that anyone is surprised by this reaction – and that the company could not have figured out that this sort of stunt is ultimately not in their own interest…

First, there’s the question of why anyone should be surprised that Warner-Chilcott is trying this. Even if this gambit fails, it can take upwards of two years for the FDA to even rule on this sort of action, which gives the company another 24 months (and potentially $300 million in sales) before the generic hits the market. If this score-line caper works it will give them a tactic that could be used for any of their future drugs, and possibly save them billions of dollars. This may not seem very civic-minded of them, but Warner-Chilcott isn’t a charity, and anything that makes billions of additional dollars for their stockholders is probably a good thing from their point of view. Or, to look at it another way, it’s probably not reasonable to expect a company to give up billions of dollars of revenue just so that insurance companies can save money on their drug benefit coverage, even if it would help a limited number of ordinary people into the bargain…

The other half of the question, of course, is why Warner-Chilcott doesn’t realize that coming off as a bunch of greedy corporate swine in the media is not doing their image any favors. While this may be a completely sound business tactic (and certainly appears to be legal enough), it’s making the company look bad and giving ammunition to all of the people who are pushing for healthcare reform and especially for prescription drug price reform in the United States. If this sort of public outrage happens too often, or goes on for too long, that reform legislation may actually gain traction in Congress, and Warner-Chilcott may find all of their products are no longer as profitable as they could wish. Unless they’ve got some larger strategy in place (and I personally can’t imagine what that would be), this one short-term gain could possibly result in the long-term downfall of their entire industry…

That’s not going to look good on their annual report…

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