The Great American Drug Deal

by Peter Kolchinsky

  So, with all these generic drugs competing with each other for market share, how can the consumer be sure they are getting the best price? That’s another key component of this system, when it is working as it should. If a doctor writes a prescription for Zestril, in almost all cases, the pharmacy that fills the prescription doesn’t actually have to give the patient the expensive Zestril-branded version of lisinopril. The pharmacy can give the patient a generic version of the drug for a lower price. Most patients don’t even need to comparison shop—their pharmacy does it for them!

  In fact, if insurance is paying for the drug, as is most often the case, the insurance company requires that the pharmacy fill the Zestril prescription with a generic version to save the insurance plan money. And since the pharmacy is paid a fixed amount by the insurance company for the generic, it’s in the pharmacy’s interest to source the product from whichever manufacturer sells it for the lowest price. What insurance plans save by making pharmacies shop for the least expensive generics helps reduce the cost to consumers of their insurance plans.

  Even if a patient is paying out of pocket for the drug, pharmacies compete with one another for customers, who often buy other products each time they come to refill their prescriptions. Pharmacies can’t afford to lose their customers to another pharmacy that sources even cheaper generics and can sell them for less. So they have a strong incentive to comparison shop to be able to offer the lowest prices they can, benefiting everyone. In this way, savings from the constant price war among generic manufacturers and pharmacies are passed along to the consumer.13

  There are many hundreds of generic drugs like lisinopril.14 Not all of them were billion-dollar blockbusters, and not all of them are equally ubiquitous. Many, like drugs for rare forms of cancer, are rarely used but no less essential to those who need them. These drugs represent decades of research, clinical trials, and medical practice. Together, they make up a metaphorical mountain of inexpensive, generic pharmaceuticals used to treat high blood pressure, high cholesterol, diabetes, migraines, inflammation, chronic pain, depression, schizophrenia, heartburn, hypothyroidism, infections, prostate enlargement, insomnia, ADHD, Parkinson’s disease, and cancer, as well as preventatives for heart attacks and strokes.

  Though generics account for a whopping 90% of all prescriptions written in the US,15 people outside the medical field rarely think about this mountain. These represent just a glimpse of the medicines that biotechnology can produce for humanity if we continue to fuel and incentivize the biopharmaceutical industry. Society tends to take these drugs for granted, yet they serve more than just the patients who take them. When lives that would otherwise have been cut short are rescued, our loved ones remain with us to enrich our lives. Musicians, painters, and authors live on to create new works. Scientists survive their illnesses to make new discoveries.

  Today, as we focus on the diseases that remain untreated, we can lose sight of this mountain of available drugs and forget to honor yesterday’s innovations. Despite their benefits, some of these drugs may have been derided back when they were launched because of their prices or frowned upon as “me-too” drugs, only incrementally better than similar drugs. Yet even after these medicines go generic and disappear from public consciousness, they continue to pay dividends with even incremental advances compounding on themselves, prolonging life and health in a modern age, which is actually not so far removed from a time when a simple abscess could prove deadly.

  Origin Stories

  Behind each generic drug is a story of risky and expensive innovation. The story of lisinopril starts with a chemist named Arthur A. Patchett. He and his team—Elbert E. Harris, Edward W. Tristram, and Matthew J. Wyvratt—created a very special chemical that has helped millions live longer, healthier lives.16 But you won’t find much about them on the Internet, nor are their names listed on a bottle of lisinopril generic pills. Seems strange, doesn’t it? Imagine a publisher bringing to market an inexpensive copy of Pride and Prejudice, the copyright to which long ago expired, and deciding not to put Jane Austen’s name on the cover. Not even Merck, let alone Patchett, is mentioned on a bottle of lisinopril generic pills, which only credits the company that manufactured that particular generic itself. Imagine if every copy of Pride and Prejudice were merely stamped with the name of its publisher.

  Of course, Arthur A. Patchett and his team didn’t develop lisinopril alone. They and those like them are overlooked in part because developing a drug and bringing it to market is a massive project that requires huge sums of money and hundreds, even thousands, of people, including pharmacologists, clinical researchers, lawyers, accountants, consultants, and technicians. Today, an estimated 4.7 million people are directly or indirectly employed in the discovery, development, and commercialization of pharmaceuticals—and that’s just in the US. For every success there are many failures, years of research and millions of dollars of investment poured into molecules that never make it past the initial development phases into human trials.

  If a candidate drug seems promising, researchers and chemical engineers have to figure out how to manufacture it at scale, develop tests to ensure batch-to-batch consistency, and come up with packaging that will deliver the right dosage.

  If it makes it to human trials, then the real costs pile up. Enrolling a single patient in a drug study is extremely expensive; $200,000 per patient is now common for cancer studies. That money goes to hospitals, physicians, nurses, laboratories that run tests, experts who serve on safety and ethics boards tasked with overseeing the trials, and vendors that keep clear and honest records of how the trial is conducted so that the results can be trusted.

  And then there’s the unquantifiable human cost of developing a drug. Patients risk much—even their very lives—in order to participate in a clinical study, hoping to benefit from a new discovery and to help other patients like themselves. Many of these patients do so knowing that there might be no benefit or that they’ll end up in a control group and given a placebo. These patients shoulder the risk that an experimental drug may actually harm them and understand that, whether the drug proves effective or not, their sacrifice advances the pursuit of knowledge. Despite the amount of time and resources that have gone into getting a drug to this phase, most drugs that enter human testing fail those trials, either because they are deemed unsafe for patients or turn out to be less effective than predicted, leaving inventors, investors, and, most poignantly, patients disappointed.

  The small minority of drugs, those that do manage to navigate all of these obstacles and make their way into medicine cabinets as branded drugs, must one day shed their brand names and join the growing mountain of generics. And, again, that is as it should be. But perhaps we should find ways to appreciate and celebrate the Arthur A. Patchetts of the world. If their inventions are destined to do great things, perhaps they deserve to be recognized, though they didn’t do it for the fame. Doing so will remind us not to take for granted the mountain of generics that is their legacy and gift to future generations.

  My point is not that specific people or companies should demand or are even entitled to more recognition than they received—some inventors are quite modest—but the fact that we do not ascribe inventorship to generic drugs allows us to blindly enjoy their benefits while forgetting all it took to bring them into the world. These drugs are successful products of human ingenuity and labor, and what we take for granted we also risk thoughtlessly discarding.

  Drugs Are Special Because They Can Go Generic

  Every new drug’s story begins differently, but most of those stories will end the same way. It is the destiny of nearly all new drugs to become as affordable and accessible as Zestril.17 These include better treatments or even cures for cystic fibrosis, HIV, hepatitis C, lung cancer, and multiple sclerosis.18 Even the medicines we haven’t yet discovered for all the healthcare problems we haven’t yet solved will, thankfully, someday go generic.

  In a W
all Street Journal op-ed, I argued that because human biology is essentially unchanging, many drugs we use today will work as well in a century.19 Some may even work better with improved diagnostics, delivery technologies, and insights into drug combinations. Thus, the scientific progress we achieve in our lifetimes will also benefit future generations.

  Therefore, whenever a debate about drug prices breaks out, it is important that we take into account what society is trying to achieve by supporting the biopharmaceutical industry. Despite the headlines and Wall Street fanfare that heralds a new drug’s approval, the purpose of the industry, as a whole, is not simply to invent new drugs to help those in need today, nor is it to generate short-term profits during the 10- to 15-year life of the patent, though companies must to survive. Its greater purpose—even though currently most people in the industry are not conscious if it—is to expand humankind’s generic drug armamentarium, the vast, inexpensive toolkit of medicines and know-how that make up our standards of care.

  Altruism doesn’t have to be part of the motivation of every, or even any person who works in the drug development industry, just as no one cell in your body needs to know your reason for being for you to feel that you have a purpose. Individuals are also motivated by their own personal goals, such as putting their kids through school, affording a nicer home, or even becoming rich and famous. But the rules to which the drug industry is subject—such as the FDA’s requirement that companies prove their drugs work and typically beat standard of care, that insurance companies only pay for new drugs that are better than generics, and that patents eventually expire—requires that the enterprise as a whole achieve a noble goal: improving human health with new drugs that will someday go generic.

  By comparison, the tobacco and fast food industries—and everyone who works for them–sustain themselves only by keeping customers smoking and eating french fries.

  Still, I’m not making any argument about the inherent nobility of the average scientist over the average tobacco executive—that would be easy, but it’s not necessary. I’m simply making the argument that we should not lose sight of the fact that the ultimate product of the drug industry—our generic armamentarium—is an unalloyed positive for humanity, and we should preserve its operation to expand this valuable, inexpensive resource.20

  When it comes to our healthcare system, drugs are unique.21 Unlike a doctor’s visit, an MRI for a sprained knee, a hip replacement, a routine mammogram, nursing care, home healthcare, and all the other healthcare services and procedures, drugs are manufactured goods that become less expensive over time once they go generic. Collectively, service-related costs account for the vast majority of healthcare spending, over 70%, far more than what we spend on drugs. They typically require the time and effort of expensive, highly trained professionals, including doctors, surgeons, nurses, and technicians, whose salaries climb each year. These services require land, which is in short supply (especially near cities), and buildings, such as clinics and hospitals, that are expensive to build, equip, maintain, and sanitize. And, again, those costs rise each year. Healthcare services never go generic; their costs will continue to climb over time. Furthermore, unlike services, drugs benefit from economies of scale, which means that the higher the number of patients that need a generic drug, the less expensive it is to treat each one.

  Well, you might be thinking, if this mountain of generics is so important, why not just make all drugs go generic right now?

  Let’s explore that option, the numbers behind it, and the effects it would have, good and bad. Imagine that all currently branded drugs immediately went generic, through government-mandated price controls, invalidation of their patents (aka “march-in rights”), or some other means. Branded drug spending could fall by as much 90%, resulting in a one-time 6.7% reduction in healthcare spending. That works out to about 1.2% of US GDP.22 Within a few years though, healthcare costs would revert to previous levels due to the rising costs of hospitals, surgeries, and other non-genericizable services.23 Meanwhile, without revenues from branded drugs to incentivize and fund new development, our mountain of generic drugs would cease to grow—the conveyor belt would grind to a halt. In exchange for a modest and temporary savings in our collective budget, we would have destroyed the drug industry’s innovative core, the system that incentivizes the creation of new treatments for migraines, bone fractures, cancer, diabetes, and countless other diseases that send patients, young and old, to hospitals each year. As overall costs continued to grow, the public would realize what Congress and insurance companies already know: the bulk of healthcare costs stem from hospitals and services, none of which will ever go generic.24

  We Need to Celebrate When Drugs Become Generic

  An earlier version of this section was originally published in Stat in February 2019, with Jessica Sagers, PhD25

  In January 2019, readers, archivists, and creatives in the United States celebrated a special holiday: the largest Public Domain Day in 21 years.26 The legal ownership of hundreds of works of classic literature, including well-loved Robert Frost poems like “Nothing Gold Can Stay” and “Stopping by Woods on a Snowy Evening,” was transferred into the hands of the people.

  From that day forward, all works of literature published for the first time in the United States in 1923 became free for creators to share and innovate upon. New compilations of classic poems will be printed, with younger artists lending more diverse perspectives to introductions and illustrations. The opportunity to choose between multiple editions of classic texts will bring down prices, increasing accessibility. Creative parodies, such as 2009’s Pride and Prejudice and Zombies, will abound. Film and television will incorporate relevant material. If you first heard Percy Shelley’s “Ozymandias” and Walt Whitman’s “When I Heard the Learn’d Astronomer” while watching “Breaking Bad,” you have the public domain to thank.

  But you don’t have to wait for Public Domain Day to learn what’s coming. The literary and artistic community can consult Open Knowledge Foundation’s Working Group on the Public Domain and the Public Domain Review, as well as Twitter accounts (for example, @publicdomainday) to learn when copyright protections will expire.

  But when it comes to drugs, no such luck.

  For starters, specific information on drug patent expirations is suspiciously difficult to find. A few websites, including GoodRx and Drug Patent Watch, compile lists of drugs that should, in theory, go generic within the next few years, but there is no definitive, trustworthy resource available to the public.

  As for an actual event dedicated to celebrating drug patent expirations? There’s nothing even close.

  All of that should change. Like the literary and artistic communities, the biotech community should develop information resources on patent expirations, though there could be some significant hurdles (access to this information may be impeded by lawsuits and pay-for-delay settlements, for example).

  And why not have a Public Domain Day for drugs? Why shouldn’t we show innovators that they are appreciated, while also applying some pressure to companies that are considering tying up patent expirations in complicated legislative battles that delay the entry of generics (see Chapter 13)?

  Creative Commons and the Internet Archive sponsored a public-domain-themed bash in San Francisco to celebrate Public Domain Day, featuring keynote speeches by Harvard and Berkeley intellectual property law professors accompanied by lightning talks and panels devoted to the newly available works.27 Imagine a similar event celebrating the drugs whose patent protections are set to expire in the upcoming year, perhaps with their creators recounting stories about how they were developed, physicians giving their clinical perspectives, and patients sharing how these medications changed their lives.

  Celebrating and upholding patent expirations and the advent of generics is only a step toward a healthcare system that is cost-effective for society and affordably meets patient needs—but it could be a sign
ificant and memorable one.

  * * *

  6It’s unusual and confusing that the same drug was marketed under two brand names, but it’s not important. The Zestril brand dominated so I will refer to branded lisinopril as Zestril going forward.

  7J Conway et al., “Lisinopril and Enalapril in Hypertension: A Comparative Study Using Ambulatory Monitoring,” Journal of Human Hypertension 4, no. 3 (1990): 235-9. https://www.ncbi.nlm.nih.gov/pubmed/2163450.

  8AstraZeneca, 1999 Annual Report, accessed Oct, 15, 2019, https://ddd.uab.cat/pub/infanu/40172/iaASTZENa1999ieng.pdf.

  9David H. Kreling et al., Prescription Drug Trends: A Chartbook Update (Madison, WI: The Kaiser Family Foundation, 2001), http://files.kff.org/attachment/report-prescription-drug-trends-a-chartbook-update.

  10Prescription rates are higher now not necessarily because the drug is less expensive, though that helps, but because America’s population has increased and aged and, with the rise of obesity due to changing lifestyles, the rate of heart disease has climbed.

  11Social contracts can be explicit, such as when Americans gave their representatives the power to govern them within the democratic precepts of the Constitution and the Declaration of Independence. In other instances, social contracts become implicit agreements between company and consumer. Google’s memorable motto, “Don’t be evil” (now “Do the Right Thing”), became an implied promise to the user that, “In exchange for using our services, we won’t do anything monstrous with the power you’ve given us.”

  12For all society cares, what matters about genericization is not that a drug’s price drops due to competition, but just that the price drops when the patents expire. Which is why we’ll talk in Chapter 8 about ways of simulating, through novel regulations, the genericization of a drug that would be ungenericizable by competitive means and would otherwise enjoy a natural monopoly (i.e. competitors can’t make a copy of the drug due to reasons that are partly scientific and partly legal).