Who's Really Raising Drug Prices?

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In another case, the FTC is investigating Hoechst AG's effort to prevent Cardizem CD, its well-known chest-pain and hypertension drug, from going generic. Alleging an infringement on its patent, Hoechst sued a small producer called Andryx, which had intended to bring out a generic. Then, last year, Hoechst agreed to pay Andryx $40 million annually in return for the company's pledge to withhold manufacturing of the generic pending resolution of the legal case. That pact triggered at least five consumer lawsuits, and one litigant labeled the payment to Andryx "an outright bribe" to protect Hoechst's roughly $700 million in annual revenues from Cardizem.

For the pharmaceutical companies, such battles are worth fighting. More than 30 years ago, Wyeth-Ayerst lost patent protection for Premarin, which at least 8 million women take to fight osteoporosis and the impact of menopause. Yet the company has fended off repeated attempts, most recently by Barr Laboratories and Duramed Pharmaceuticals Corp., to introduce a generic. Wyeth argues that Premarin, derived from the urine of pregnant mares, contains vital organic ingredients that are not reproduced in the synthetic compounds made by the generic manufacturers. While the debate has dragged on, the Food and Drug Administration has denied Duramed or any other company the right to produce a generic equivalent.

The struggle over patent extension is where Mylan has assumed the role of crusader for lower-cost drugs. Last year the company helped found a lobbying group called the Campaign for Fair Pharmaceutical Competition. The group is currently pushing to eliminate sections of the Waxman-Hatch Act, a landmark 1984 law designed to promote drug competition. One target: a provision that prevents the FDA from reviewing generic-drug applications for 30 months if the patent holder sues.

The opposing lobbyists have a slightly different spin. Proprietary medications can work better and sometimes protect consumers from potentially unsafe or ineffective generic compounds, according to Alan Holmer, president of PhRMA, a lobby for the brand holders. He derides Mylan's lobbying as "nothing more than a brazen attempt to deflect attention from the generic industry's embarrassment at its recent dramatic price increase and calls for antitrust investigations of their practices."

The rise in drug spending is beginning to have political repercussions. A movement is under way at the federal and state levels to bring about cheaper prescription drugs, an effort that could help the lower-cost generics. Bills are pending in several states, including California, to force drug companies to discount products for seniors. In Congress, a bipartisan commission will probably attempt to get Medicare to reverse its policy against paying for prescriptions, which could also favor the generics.

Whatever happens to Mylan, America's generic-drug industry is likely to emerge much stronger from the current turmoil. Even with delays, brand-name drugs that now account for sales of more than $40 billion a year could become available in generic form by 2008. Based on current pricing, consumers might save an additional $16 billion. And that's not too hard to swallow.