Drug maker’s start to roll out their own generics to maximize profits


Earlier this year, PDL BioPharma was set to face generic competition for its $40m blood pressure medicine but to competitors surprise it brought out its own generic. A burgeoning strategy which critics say keeps competition weak and drugs expensive. Its own generic helped to keep momentum for its product and protected its sales. 

Back in the 1980’s, lawmakers who created the generic pharma industry would never have expected major drug makers to produce their own competition. Yet this move makes total sense, as authorized generics can be just as profitable if not more profitable than branded drugs. It is also the most profitable move pharma companies can make when facing generic competition instead of adding new ingredients and seeking new approvals to treat different diseases.

 Authorized generics do not promote competition as the marketing and production is exclusively controlled by the drug manufacturers. Last year, an authorized generic was approved at an approximate rate of once a week and around 1200 approved authorized generics now exist in the US.

However, the benefits of authorized generics have split audiences, with brand-drug lobby,  PhRMA, stating that authorized generics increase competition even if they are not an independent product. They also stated that this ‘increased’ competition reduces prices and results in significant cost savings. On the other hand, critics have said that authorized generics hurt long term competition and increase drug prices in the short term. Their presence removes not only sales of generics but also the incentive to make generic products.

Authorized generics have the possibility of being more profitable than the branded drug because even if the list prices are lower, they are not usually subjected to rebates that flow from the drug maker to middlemen. An example of their profitability is with Eli Lilly’s, Humalog insulin. The list price for the authorized generic is around half of the branded version, $137 to $275 respectively. This supposed discount, offers relief to uninsured patients and generates gracious headlines. However, this move came at no cash loss for Lilly, because after rebates, $137 is approximately what Humalog would typically bring in. A further advantage is that major drug manufacturers can release their authorized generic well before the patents have expired and before there is even a hint of competition in the market, truly creating a dominance that needs to be checked.

So powerful is the authorized generic, that the mere mention of it is enough to smother competition. With pharma companies using it as a ‘threat’, saying to generic manufacturers that they would retain the authorized generic from manufacturing if the generic firm agreed to delay launching their products. In this alternative arrangement, both sides win, with the brand reaping the rewards of an extended patent run and the generic can avoid facing the authorized rival later on.

Personally I believe that the role and rights of authorized generics needs to be reviewed and checked by governing bodies as not only does it take away fair competition in the market but more importantly it has huge effect on patients and the accessibility of these treatments to those who need it urgently.

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