Want to cut health care costs? Start here.
By Sarah Kliff,
Every year, Americans pay $700 million more for cholesterol-lowering drugs than they need to. The reason? Abbott Laboratories.
Photo illustration by The Washington Post; Original image from istockphoto.com
Abbott Labs is a pharmaceutical company based in Illinois. About a decade ago, in 2000, it faced a problem. The company had recently acquired exclusive rights to sell Tricor-1, a cholesterol-fighting drug. It was profitable, which was nice, but the best part was this: It was a name-brand drug and Abbott was the only company with rights to sell it.
Drug exclusivity does not, however, last forever: After a name-brand drug has five years on the U.S. market, generics are allowed to come in and compete. That’s what a generic pharmaceutical company wanted to do with Tricor-1. Novopharm submitted an application to the Food and Drug Administration to produce a generic version of the drug.
That was bad news for Abbott Labs: With generics tending to sell at about 80 percent less than brand-name drugs, the new medication had the potential to seriously undercut its Tricor-1 business.
Abbott Labs was able to delay Novopharm by a bit, a story that health-care researchers recount in a recent Annals of Internal Medicine article. The company filed a patent infringement lawsuit that ate up some months, and in the meantime, they came up with Tricor-2. It looked a lot like Tricor-1 — same active ingredients, same uses, nearly the same name. But there was one hugely important difference: Dosage. Where Tricor-1 came in 67 and 134-milligram formulations, Tricor-2 would come in 54 and 160-milligram dosages.
By time Novopharm’s generic came onto the market, Abbott Labs had already rolled out Tricor-2 and made it doctors’ prescription of choice. Six months after its introduction onto the market, Tricor-2 accounted for 97 percent of all prescriptions for this type of medication, known as fenofibrates.
Over the past decade, this has happened two more times. Tricor-3 replaced Tricor-2. Abbott did get a little creative with the name this last time, replacing Tricor-3 with a different dosage branded Tripilix. “As soon as direct, generic competition seemed likely at the new dose level, where substitution would be allowed, Abbot would launch another reformulation, and the cycle would repeat,” Yale University’s Nicholas Downing and his co-authors write.
The cost implications of Abbott’s strategy are pretty big: The Annals of Internal Medicine estimates that, if the health-care system had come to rely on Novopharm’s generic medication, our health-care system would be saving $700 million every year. Overall, the use of generic drugs is estimated to save the country $158 billion annually, which breaks down to $3 billion a week.
Part of the blame, the researchers say, goes to doctors, who have predominantly stuck with Abbott’s brand-name drugs as their prescription of choice.
They call their findings “a cautionary tale for physicians, who must accept some responsibility for the continued use of branded [drugs].”
“Despite the availability of many generics during the past nine years, physicians have continued to prescribe Abbott’s more expensive formulations,” they write. “Which in December 2009 accounted for more than 75 percent of all prescriptions.”
Some of the issue has to do with the regulatory system, too. Each time Abbott Labs faced a new generic, it would launch a patent infringement lawsuit. Each time it did that, it would create a huge delay for the generic pharmaceutical company, as the FDA requires all applicants to have resolved any outstanding patent disputes before seeking approval.
The more fundamental question, though, is about whether the new dosages of brand-name drugs ought to get new exclusivity periods in the first place. The new Tricor dosages, after all, never showed improved outcomes for patients over previous formulations. Most of them didn’t require financing for new patient trials or testing. Without the new Tricors, we’d have the same outcomes – and $700 million each year in additional health-care spending.
(h/t: Aaron Carroll)