The Generic Bandwagon

Posted on | November 7, 2007 | Comments Off on The Generic Bandwagon

How generic medicines fit into the big picture of health care

It came as a surprise to some recently when we learned that the average price of pharmaceuticals grew last year at a much lower rate than other consumer categories, such as groceries and gas. What’s going on? Why have some drug prices leveled off? Part of the answer is found in the complex relationship between the discovery and research process that provides us with new drugs and the production and marketing that follows.

Generally, production and marketing of drugs falls into two categories: the newer, more expensive, brand name drugs and the older, less expensive, generic drugs – which are copies of products that are no longer protected by patents. Since the “blockbuster decade” of 1990 to 2000, when an explosion of new drugs hit the market, generic versions of drugs have been on a fast upswing as patents have expired. In 1999, 51 percent of U.S. prescriptions were filled by generics – but by 2007 that number had grown to 63 percent. Additionally, large-chain retailers such as Wal-Mart, K-Mart and Target are changing their pricing structures for generics – and this has lowered costs even more.

That’s all great news for the average American – who can complain about lower price increases? But it does raise some troubling questions about the future of research. The research and discovery process that drug makers engage in is paid for by the marketing and production of their brand name products – and if that pool of funding is diminished by the growth of generic sales, the development of new products could be impacted. And without new products, generic companies will have nothing in the future to copy and sell at a lower price. To keep prices down for old drugs and to keep the pipeline of new drugs thriving, both research companies and generic companies must succeed.

Bottom-line: Drug discovery and marketing is a balancing act. To understand it a little better, be sure to watch this week’s video (embedded with this blog post) or read the full transcript of this week’s program, below. How do you feel about new drugs compared to generics? If you have an experience to share, please post a comment.

Mike Magee