Ending prescription drug 'product hopping' could save $4.7 billion annually
Drug companies' practice of tweaking drug formulas to extend their patents and delay generics is costing consumers.
A new report suggests that “product hopping”—a practice by drug companies to extend their patents on profitable drugs—costs American consumers and the U.S. health care system billions of dollars each year.
The report, from Matrix Global Advisors and the Coalition for Affordable Prescription Drugs (CAPD), looked at five prescription drugs: Prilosec, TriCor, Suboxone, Doryx, and Namenda. As with other examples of product hopping, drug companies have tweaked the formulas on those drugs, allowing them to extend their patents on the new formulations, and delay the move to the generic drug marketplace.
Related: How ‘generic’ is that generic drug, really?
CAPD is an industry group made up of purchasers, such as employers and unions, along with pharmaceutical benefits managers and insurers.
The report finds that extending patents on just those five drugs will result in a cost to the U.S. health care system of $4.7 billion annually—money that in theory could have been saved if the drugs had been available in a generic form.
“With product hopping, when the drug is supposed to go generic, the drug company instead makes a minor tweak to the drug and rebrands it. Drug companies market this practice as “innovation,” but don’t be fooled,” CAPD said in a statement. “This practice really just allows the manufacturer to put what is essentially the same drug back on the market as a “new” drug, push patients onto that materially same drug at a higher price and take advantage of charging patients high monopoly prices a second time.”
Strategies to get around regulations
The report notes that the 1984 Hatch-Waxman Act was a key piece of legislation that sought to balance rewarding drug manufacturers for innovation while still providing a way to lower the cost of drugs over time by requiring them to be released to the generic market. The act put a 20-year limit on brand-name drugs; after that period, they were required to be made available as generics.
The study’s author, Alex Brill, outlined some ways that pharmaceutical companies have attempted to game the system, through litigation or other strategies. “Between 1995 and 2014, generic entry for brand drugs with sales greater than $250 million was delayed an additional 2.2 years on average, from 10.3 to 12.5 years,” Brill said, adding that he estimated the US health care system would have saved $31.7 billion if those delays had not happened.
Brill noted other research that showed 78% of drugs associated with new patents, according to the FDA, were not new drugs coming on the market, but existing drugs. Re-making the drugs could be as simple as switching their form from a pill to a tablet, or vice versa, he wrote.
“While there are ways that a reformulation of an existing drug can bring real benefit to patients, reformulations often are used only as a tactic to thwart competition,” Brill said.
A prominent example is the anti-ulcer drug Prilosec, which at one time was the top drug by sales in the US, with $4 billion in sales in 2000. “In anticipation of generic competition for its blockbuster product, AstraZeneca, Prilosec’s manufacturer, introduced and pushed doctors to prescribe its new anti-ulcer drug, Nexium, which was only slightly chemically different from Prilosec but had 13 years of patent protection left,” Brill wrote. AstraZeneca was sued under anti-trust laws, but a district court sided with the manufacturer.
Fixes for the product hopping problem
The report noted the mixed results coming from litigation, which can be expensive and time-consuming. It added that some legal scholars are pushing the FDA to take more decisive action. Another possible fix is included in a bipartisan bill called “The Affordable Prescriptions for Patients Act,” which was introduced in 2019. That bill gives the FDA more powers to directly address the product-hopping practice.
The study also mentioned a regulatory proposal from the Centers for Medicare & Medicaid Services (CMS), which would address the issue for the Medicaid market.
In its statement, CAPD urged policymakers to take action on the issue. “[CAPD] will continue to advocate for policy changes to stop product hopping and other gamesmanship by drug companies,” the statement said. “Without closing these loopholes, American patients and taxpayers will be stuck paying needlessly higher prices for the drugs they need to stay healthy.”
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