"For anyone taking these meds, a practical solution is to have your prescription written with the “No substitution” box checked, if that option is available in your state.
Its interesting to observe the attitudes toward generic pharmaceuticals. The vast majority of retail investors in development stage biotechs have little appreciation for the role generics play in our health care system, which I suppose is understandable since if things work out as they hope, they won't like having the patents of their drugs challenged.
However, people should keep in mind the impact generic drugs have on health care in America. For instance, In 2003 the total retail value of prescription pharmaceuticals dispensed in America was $216 billion. If you took the portion of total dispensed scripts that were generic and valued them at the corresponding brand prices of the related drugs, the cost of dispensed prescription medication in 2003 would have been $350 billion. That is, generic pharmaceuticals lowered the cost of prescription pharmaceuticals to American consumers in 2003 by $134 billion!
That's a huge cost savings that unquestionably benefits consumers. The cost of prescription drugs is already very high in America, and if you added another $134 billion to the annual cost, it would not take long to come to the unavoidable conclusion that one of two choices would ultimately have to be made:
(a) ration health care, or
(b) establish price controls.
I doubt anyone would want to seriously contemplate either of these options, including investors.
The paragraph iv challenges to the patents of branded drugs by generic pharmaceutical companies is not economic piracy being perpetrated by a bunch of rogue businessmen. Rather, its a mandated public policy objective of the US Congress when it enacted the Hatch Waxman Act in the mid '80's. In an effort to curb the skyrocketing prices of prescription medications, this legislation provided incentives to companies that challenge these patents prior to their statutory expiration date.
When you consider employee healthcare costs represent a larger percentage of the total cost of a new automobile to GM last year than did steel, you begin to gain an appreciation for the how the $134 billion of annual Rx savings directly attributable to generic drugs impacts society. The stakes are enormous and they're growing. And not just the stakes to investors in branded pharmaceutical companies, but the insurance companies that pay for these escalating costs and all of industry.
I think everyone wants their own health care costs to be kept under control, but as investors, we generally hate the threat posed by generic competition in the market. This is equally true for biologics, which are definitely coming but will surely be delayed. Its akin to citizens that uniformly cry out to their legislators for lower taxes in one breath, then demand better services from government in the next. Go figure.
Anyway, before we embrace any grass root campaigns designed to limit generic substitution, we ought to consider the larger implications this issue has on us beyond merely the price that stocks we're invested in might print on a given day. If the innovator drug companies got back to the business of doing what they do best (i.e., discover and develop safer and more efficacious drugs to improve our quality of life) instead of devoting so much of their time and resources to extend patent lives via the abuse of loop holes in the current law, we'd all be much better off.
Anyway, that's my opinion.
Regards,
BI
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