Prescription for Cheap Drugs

By Charles P. Alexander

Congress aims to encourage generic alternatives to brand-name medicines

Millions of Americans take prescription drugs to feel better, but the prices they pay often keep them feeling a bit sick. Dyazide, a brand-name drug for the treatment of high blood pressure, costs as much as $21.50 for 100 capsules. The drug racked up sales of $230 million last year for its manufacturer, Smith Kline & French. Although the company's patent on the drug expired in 1980, no other firm has come out with a less expensive version. Dyazide is just one of many bestselling brand-name drugs with no competitors. Reason: U.S. law has made it costly and time consuming for companies to get the Government's go-ahead to market so-called generic copies of brand-name drugs. That regulatory roadblock has thwarted competition and cost consumers untold millions of dollars.

Now Congress is breaking down the barrier. The House last week unanimously passed a bill, almost identical to one already adopted by the Senate, that will speed up approvals of generic drugs by the Food and Drug Administration (FDA). In the past, companies wishing to sell generic versions of drugs marketed after 1962 had to submit detailed scientific studies to demonstrate the pills' safety and effectiveness, even though they were merely copies of medicines already being sold. Under the new law, firms need only show that their generic pills are the chemical equivalents of brand-name drugs and deliver the same amount of medicine with the same speed into the bloodstream. Because of this change in the rules, industry experts predict that within a year or two, generic copies of perhaps 150 leading brand-name drugs will appear. They include Valium, a tranquilizer, Diabinese, a pill to control diabetes, and Motrin, a medicine for arthritis. Hemant Shah, a drug-industry specialist with Mabon, Nugent, a Wall Street investment firm, estimates that by 1987, 25% of all prescriptions will be filled with generic drugs, up from 15% in 1983.

That trend should produce dramatic savings for consumers -potentially $1 billion over the next twelve years, according to the FDA. Generic drugs already on the market usually cost much less than their brand-name counterparts. At one Dallas pharmacy last week, customers had to pay $8.79 for 20 tablets of Lomotil, an antidiarrhea pill made by G.D. Searle. But the same amount of medication was available under its generic name, diphenoxylate, for only $3.29. In one New York City drugstore, a medicine for high blood pressure made by Ciba-Geigy called Apresoline cost $15 per 100 tablets; its generic equivalent, hydralazine, went for $6.95.

A new drug is given a generic name by a unit of the American Medical Association. That name reflects the drug's chemical properties and is often a tongue twister. The company marketing the medication usually gives it a short, snappy brand name that doctors and patients can remember. Hoffmann-La Roche, for example, developed a tranquilizer with the generic name chlordiazepoxide, but sells it as Librium.

The new drug law is the latest chapter in a long-running dispute between two factions of the pharmaceutical industry. On one side are such large and well-known companies as Smith Kline & French, Eli Lilly, Merck Sharp & Dohme, Pfizer, American Home Products, G.D. Searle and Sandoz, which develop new drugs in research labs and market them under brand names. These firms maintain that they need to charge high prices to finance the research that leads to important new drugs. Hoffmann-La Roche says that it spent at least $65 million to develop Accutane, a drug for cystic acne. For every 2,000 chemical compounds the company studies, only one will show enough clinical promise to make it to the market.

On the other side are dozens of smaller generic houses, including Rugby, Bolar and Par, which market copies of drugs and do relatively little research. The brand-name companies argue that the generic firms sometimes sell poor-quality drugs. The generic manufacturers say that the big companies are trying to preserve profits at the expense of consumers.

After years of opposing rule changes that would encourage the use of generics, the brand-name companies supported the new law on one condition: that it strengthen drug patent protection. A patent lasts for 17 years, but the companies contend that about seven years are often used up in testing before the FDA clears the medicine for sale. After the legislation takes effect, new drugs will receive up to five years of extra patent time, depending on how long the FDA has taken to approve the product. But the law does not affect dozens of older drugs that will lose their patents in the next few years.

Expiring patents and the spread of generics will put pressure on the top drug companies. Their profits have been rising by 10% to 12% a year, but some industry experts predict that this growth rate will now slow to 5%. One of the firms expected to suffer is Merck, which had earnings of $450.9 million in 1983. The company loses its patent this month on Aldomet, a popular medication for high blood pressure that generated sales last year of about $200 million. David Saks, a Wall Street analyst with the Becker Paribas investment firm, says that competition from generic copies may force Merck to slash the price of Aldomet, now about $18 for 100 tablets, by 30% or more.

Armed with huge promotional budgets, the large pharmaceutical houses are working hard to keep doctors and pharmacists loyal to brand names. Drug company representatives, known in the trade as detail men, frequently drop by doctors' offices to pitch products and give out glossy brochures and free samples. Medical journals are chockablock with full-page, full-color drug ads. Some firms have resorted to giveaway gimmicks. Independent pharmacists who place drug orders with Searle have a chance to win a trip to Greece and earn points toward such gifts as jewelry, china and crystal.

The big drug companies encourage skepticism among doctors and pharmacists about the quality of some generic products. Sandoz last year ran an ad in the American Druggist magazine for the tranquilizer Mellaril. It showed an elderly woman with an alarmed look on her face. In her hand was a vial that apparently contained a generic imitation of Mellaril. The text implied that a switch to a generic version of Mellaril could cause increased side effects, including symptoms similar to those of Parkinson's disease. The FDA said that the claims in the ad were false and ordered Sandoz to withdraw it, but the company had already made its point.

American Home Products, which has three top-selling drugs that lose their patents this year, has been sponsoring a ten-city lecture tour by Paul Doering, an associate professor of pharmacy practice at the University of Florida. At pharmacists' meetings and in television appearances, Doering has been spreading the word that generic drugs may not be as good as brand-name products. Says he: "I believe that drugs are far too important to be considered just another commodity."

Doering argues that some generic drugs do not dissolve as fast or as completely in the intestine as do brand-name pills. That could be dangerous for patients taking drugs for life-threatening diseases. The FDA, though, disagrees with Doering. Says Dr. Peter Rheinstein, the agency's director of drug standards: "There are no more safety problems with FDA-approved generic drugs than with brand-name medications."

All 50 states have passed laws that allow pharmacists to substitute a generic equivalent for a brand-name prescription unless the doctor specifically forbids it. In Florida, druggists are required to tell customers how much they will save by using generic products. To counteract these laws, the brand-name companies encourage doctors to write "dispense as written" or "no substitution" on their prescriptions. In addition, the big firms try to give their pills distinctive shapes and trademarks. Hoffmann-La Roche's Valium tranquilizer tablets, for example, have a V carved in the center. The company hopes that when Valium's patent expires next February, patients will be reluctant to change medicines and will ask for the pills with the familiar symbol.

But the brand-name companies face a broad-based movement toward generics. Some 26 states mandate the use of generic drugs, whenever possible, in Medicaid programs. Several insurance companies, including Aetna, Metropolitan, Prudential and Blue Cross/Blue Shield, have notified health-care policyholders that they will be reimbursed for 100% of the cost of generic drugs but only 80% of the price of brand-name pills. Moreover, many drugstore chains are pushing low-priced generics. Walgreens, with 947 outlets in 30 states and Puerto Rico, says that when one of its pharmacists receives a prescription marked "no substitution," he is to call the doctor before filling the order. With the patient standing by, the druggist tells the physician how much more the brand-name drug costs than the generic.

The new law appears to strike a balance between the interests of the large companies and the rights of consumers. By granting extra patent protection for new drugs, the legislation gives research-oriented firms an added financial incentive to achieve medical breakthroughs. By encouraging the sale of generic copies of older drugs, the law will help drive down healthcare costs. It is a prescription that both sides of the great drug debate should be able to swallow.

With reporting by Patricia Delaney, Raji Samghabadi