Remember how PharmaBro/Turing price-jacked Daraprim? Now there’s a very slightly cheaper generic- hardly a fix. Old drug used by few patients can’t rely on price competition to keep its cost down. This market failure calls for a better solution. 46brooklyn.com/news/daraprim
I propose “contractual genericization” in my book. thegreatamericandrugdeal.com Basic idea is that US contracts with one or two US-based suppliers to reliably supply the American public with this & other little-used generic drugs.
High quality manufactures would compete with originator to win contract for whole market but originator would at least have to guarantee an inexpensive supply as a backstop. Max price would be, let’s say, 2x cost of production, so still profitable.
Good idea for all drugs after their patents have expired (more details in the book). This price control won’t harm innovation since innovators collect their reward during the branded period.
Price jacking and patent gaming to prevent genericization represent a form of rent extraction from old drugs, whereas innovation is driven by branded drug sales, which should be finite, like mortgage payments.
Here’s an analogy. Drug companies are like home builders. Let’s say one builds a home for a family that pays builder off over time, 15 years (the branded, patented period). During that time, builder ensures that the home is reliable, nothing leaks (ie the drug quality is high).
Patent gaming in this analogy would be akin to the builder calling the family up in the 15th year, as they prepare to celebrate that they have paid off their mortgage, to tell them that due to a hidden clause in the contract, they will have to keep paying for 5 more years.
Price jacking an old, off-patent drug (what Turing did) is like someone stealing the title of a house that a family has long paid off and offering to sell it back to them.
And if you’ve read @KatherineEban’s remarkable and scary book Bottle of Lies, then you know how especially unreliable generics can be from overseas b/c FDA can’t do surprise inspections of many companies that prefer to fake their data than to make high quality generic drugs.
So the analogy there is that, after the family has paid off the builder’s mortgage and builder stops maintaining the house, the house starts to crumble, forcing the family to go back to paying the builder for his services (ie keep paying for brand b/c generics are unreliable).
But that means that the builder was never really charging a high but finite mortgage. The builder was really charging a high, infinite mortgage, which is same as high rent.
Biomedical innovators are and should be builders who prosper from their success via finite mortgage streams. They should have to keep innovating for their income. We aren’t in the rent collection business, or at least we shouldn’t be.
So if our drugs don’t go reliably generic or, once generic, don’t stay both inexpensive & reliable, we have to take accountability for quality & cost of our products even after mortgage is paid off if we hope to be able to keep charging society mortgages as reward for innovation.
Essentially I’m proposing that when patents expire, the brand just converts to an authorized generic, made the same way, to the same standard, and is sold at a still profitable but modest markup to the cost of production.
It’s the right solution to what are increasingly looking like natural monopolies. It would ensure that America enjoys the benefits of its investments (just as homeowners enjoy low cost living after paying off their mortgages) w/o resorting...
...to price controls of branded drugs that would squelch the incentives required to drive investment in innovation. For those who know what an NPV is, I’m pointing out that society has a much lower cost of capital than innovators and therefore we should...
...willingly sacrifice the tail of our NPV curve that innovators don’t value anyways (is discounted to little) but that society values a lot. And we should trade it to protecting the front end of the NPV curve that matters a lot to us from deeply flawed price controls.
Especially if agreeing to contractual genericization wins out of pocket cost reductions for patients, we will have helped achieve affordability for patients and value for society while preserving incentives for continued innovation. More in the book. thegreatamericandrugdeal.com
