The absurdity of the for-profit healthcare system was revealed again yesterday in a New York Times article about the use of brand-name instead of generic drugs. According to the article, pharmaceutical companies are cutting deals with insurers and benefit managers requiring the use of the brand-name drug where the generic would be a cheaper and equally effective alternative. Since most Americans now have high deductible plans, that added cost comes directly out of the patient's pocket.
Drugs to treat attention deficit disorder are prime examples of this phenomenon. About two years ago, doctors started being notified by pharmacies that they had to prescribe the brand-name version of Adderall XR, for instance, instead of the generic. For one family, that resulted in $50 per month in higher expenses for the child's medication which added hundreds more to their annual deductible costs.
The reason this is happening is that pharmaceutical companies are desperate to squeeze the last bit of profits out of their patent-protected drugs before and even after cheaper generics hit the market. For the pharmaceutical company Shire, Adderall XR was its top selling drug accounting for around one-third of the company's sales in 2008. But starting in the mid-2000s, the company was already making efforts to protect its star product from generic competition. First, it sued to stop generic competitors, claiming patent infringement. Then it made a deal with two generic drug makers to sell copies of the drug in return for royalties on the sales. That deal fell apart when Shire apparently provided so few pills to the generic drug makers that it was impossible for them to gain any market share at all. After that, Shire resorted to the tactic of striking these deals with insurers and benefit managers to require the use of their brand-name drug, which is what has triggered the increased costs for the family above. Essentially, Shire has spent the last decade doing everything in its power to lock out generic competition for its top selling drug.
Of course, Shire is not the only pharmaceutical company engaging in these kind of aggressive tactics to keep cheaper generics off the market. Virtually every pharmaceutical company with a patented product has used similar methods over the last couple of decades. What is new are these agreements with insurers and benefit managers to require the use of the brand-name drug. As on pharmacist said, "There’s only one reason why they’re requiring you to use a more expensive product. Because somewhere down the road, somebody is earning more money." And, consumers and patients end up paying for that.