Desperate Drug Companies Raising Prices On Drugs Still Under Patent

from the squeezing-every-last-cent dept

Fri, Apr 8th 2011 6:07am — Mike Masnick

In recent weeks, we've discussed how drug companies are freaking out because they can't find anything new to patent, and their popular drugs are about to go off patent. Of course, as we've seen, having a monopoly lets them charge ridiculously high prices, and so the various drug companies (at least those who can't get the FDA to just hand them a new monopoly) are apparently dealing with the first issue by embracing the second one: they're ramping up prices on pretty much anything they still have under patent, with the largest increases being for those drugs that are closest to going off-patent.

Talk about a short-term strategy. Historically, it's been shown that when brand name drugs go off patent, they still command a significant premium in price over generic competitors. Yet, if the drug companies keep raising the prices higher and higher, it'll simply drive more people to seek out cheaper alternatives. If the drug companies actually priced the drugs reasonably, and recognized that they already had a strong branding lead (often on the backs of huge marketing campaigns), they'd realize they could keep a decent share of the market, even with somewhat higher prices. But simply trying to squeeze every last penny out of people while the drugs are still under patent seems like a strategy to completely give up once the drugs go off patent.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: patents, pharmaceuticals, prices

27 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Anonymous Coward, 8 Apr 2011 @ 6:17am

I am often amazed by the absurdities perpetrated by the management of successful businesses. You would think they would know better. Its like they can't even look within themselves and say, "if someone tried to do this to me, it would piss me off and i would probably not buy their products, if possible"

Problem here, i guess, is that they have a captive audience. Some drugs can only be gotten from one place and the competition [other drugs] doesn't do everything that is needed.

hmmm... kind of proves the long running commentary of monopolies of any kind are bad, no?
[ link to this | view in thread ]
jenningsthecat (profile), 8 Apr 2011 @ 6:45am

Build a business model on artificial scarcity...
...and your business will fail, sooner or later. Adapt, or die.

Big Pharma, meet Hollywood and the Recording Industry.
[ link to this | view in thread ]
Don, 8 Apr 2011 @ 6:49am

Drug companies need protection, but at the same time need incentives. My big scare with drug companies and the drugs that we may need is that they will not develop new drugs if there is no financial gains attached. How many deadly diseases are there for which there are no drugs simply because drug companies don't see any revenue.

I think the best solution is to regulate them.
[ link to this | view in thread ]
Anonymous Coward, 8 Apr 2011 @ 7:09am

Big Pharm is in big trouble. They've done all the wrong things they need to do to be successful. First, they gutted their R&D divisions, relying on buyouts of other companies to keep their supply of patented drugs going. Unfortunately, that's a pretty short sighted strategy as most of those small companies they bought had all their work being done on just a couple drugs. If something goes wrong and the drug doesn't go to market, you just spent a ton of money on a now worthless drug and a now worthless company.

Now it's all about shipping R&D overseas. We'll see how that works. Heck of a lot cheaper, but who cares if they don't deliver results?

Ahh well, I'm sure they will get bailed out in one form or another. Probably with an extension of patents gifted by the govn't.
[ link to this | view in thread ]
fogbugzd (profile), 8 Apr 2011 @ 7:11am

Re:
>>My big scare with drug companies and the drugs that we may need is that they will not develop new drugs if there is no financial gains attached.

Actually, that is exactly what happened. The incentives for executives in the big drug companies is to maximize near-term profits. To further that end, the big pharma companies slashed research funds and put the money into marketing. Consequently they have their gravy-train drugs approaching the departure stations and they don't have new trains ready to take them beyond.

Smaller companies are developing new drugs, and one article I read a while back said that the major companies had been hoping that they could buy up drugs or research from some of the smaller companies, push them through the approval process and then apply their marketing expertise. I suppose this could still happen. Perhaps they are ramping up the prices of existing drugs to fund the purchase of some of the smaller companies.

One other thing is that we assume that the best way to improve health care is to develop new drugs. The drug companies have certainly perpetuated that line of thinking. However, some people in the medical community thing this is the wrong approach to improving long-term health care. New drugs can be useful, but perhaps we are putting too much emphasis on their importance.
[ link to this | view in thread ]
sumquy (profile), 8 Apr 2011 @ 7:14am

Re:
i was going to click the insightful button until i got to your last sentence. that is the kind of mentality that leads to big bureaucracy. just like any other kind of complex question, this kind of thing has to be examined on a case by case basis. otherwise, you get federal agencies tasked with making sure nobody gets to big for their britches, with no authority to look at or ask if this case or that case is actually beneficial or desirable. so these companies are forced to bribe our congresscritters to pass an exemption for this just this instance, and pretty soon the legal definition for monopoly doesn't bear any resemblance to what everyone knows it to mean and only the lawyers can sort it out.

the government that governs best, is the government that shuts itself down cuz they can't pass a budget.
[ link to this | view in thread ]
MattP, 8 Apr 2011 @ 7:17am

Re:
Seemed to work well in India before they were pressured into the patent nightmare.

http://www.techdirt.com/articles/20090807/0312375803.shtml

http://www.techdirt.com/ articles/20100412/0118378969.shtml

http://www.techdirt.com/articles/20100407/1902268925.shtml
[ link to this | view in thread ]
Jay (profile), 8 Apr 2011 @ 7:23am

Re:
There's a lot more to it, no?

The resources for drugs really isn't in the US (manpower) since the sciences aren't quite as simple to get into.

Then you have a lot of people with business degrees, running pharmaceuticals as a Wall Street business not necessarily a service.

I believe there's a lot more problems that need to be aired out before we say it's just Big Pharma's fault (it is, but there are other mitigating factors)
[ link to this | view in thread ]
OC, 8 Apr 2011 @ 7:37am

of course they do it
Of course they will do that. The upper management driving it won't be there in five years, they just want the company to earn as much cash as possible NOW so their bonuses are maximized. I doubt many people on that level are truly interested in long term profit for the company they were brought in to run for a short period of time.
[ link to this | view in thread ]
Anonymous Coward, 8 Apr 2011 @ 8:11am

While the Reuters article upon which the linked article relies does talk about patents, it also addresses other factors associated with the increases in the price of branded drugs. Thus, I do wonder if it is really fair to suggest that the upcoming expiration of patents over the next two years is because of the looming expiration.

One aspect of the article here is the mention that as prices go up consumers seek alternatives that cost less. Does this mean that perhaps these alternatives have been available all along, and that branded drugs are in fact in actual competition will all other drugs having substantially similar pharmacological/physiological efficacy? This would suggest that even "monopolies" are not freee to operate outside of normal competitive forces.
[ link to this | view in thread ]
harbingerofdoom (profile), 8 Apr 2011 @ 8:20am

Re:
the real problem is that over the last 30 years there has been a shift from long term solvency as the main corporate objective to "NOW NOW NOW" everything has to be monitized right now and if you cant monitize it right this very second you are considered a failure.

this explains nearly every corporation that has been shooting itself in the foot left right and center in the last 10-15 years. The 'NOW NOW NOW' business method is only to be used when you have no other choice but the pressure to create short term profits are causing a lot of decisions to be made that are really bad for long term longevity.
[ link to this | view in thread ]
Christopher (profile), 8 Apr 2011 @ 8:23am

Re: Re:
No, it's really that simple. Big Pharma in the US can't layoff chemists fast enough, but they seem to find money to publish fake articles touting the benefits of their drugs.

Big Pharma used to do manufacturing really well, out of necessity because the FDA regulated them. Now that's been proven to be a joke, so there's no appreciable benefit to buying Advil over ibuprofen any longer. In fact, if you watch this stuff closely, you'll be smart to buy anything Teva manufacturers, since they seem to be the only outfit that knows how to produce a quality product at the lowest possible cost.

-C
[ link to this | view in thread ]
art guerrilla, 8 Apr 2011 @ 8:31am

big pharma cries big, fat, alligator tears...
oh, boo hoo, how is a rapacious, profit-seeking, soul-crushing, inhumane super-citizen (NOT altruistic public service) going to survive ???

1. big pharma spends FAR MORE on 'marketing' (read: lies, propaganda, and bribes) than they do on real R&D... (*AND* a LOT of 'R&D' money is marketing bullshit: 'research' on color and shape of the pills, etc...)

2. NOT to mention, a LOT of the real research and clinical trials are done by 'our' public universities and med schools, which use labs, facilities, grad students, profs, etc that WE pay for/subsidize... *then*, big pharma funds a portion of 'their study', which they maintain complete control over, and deep six anything which doesn't agree with their claims... (as well as enforcing gag orders on all participating researchers...)

3. i could go on, but i'm typing with one wing in a sling, and its taking me ten minutes to type what would take less than a minute...

art guerrilla
aka ann archy
eof
[ link to this | view in thread ]
fogbugzd (profile), 8 Apr 2011 @ 8:54am

>>This would suggest that even "monopolies" are not freee to operate outside of normal competitive forces.

But if there were "normal competitive forces" in play we would not see "prices go up consumers seek alternatives that cost less." Your arguments seem to contradict each other and do suggest that at least in the company's own mindset they are working in a monopoly environment.
[ link to this | view in thread ]
Michial Thompson, 8 Apr 2011 @ 9:09am

Brand Name Edge?!?!?
little mikee, are you blind as well? You talk about the pharma companies having the brand name edge after their patents expire right? Did you forget Obama Care forced every American to have Health Insurance? Have you not looked at the pharmacy requirements of your Health Insurance yet?

The Parmacy Requirement is simply that if a Generic is available it must be used to fill the prescription. So by the very nature of the Patents expiring they are essentially dead in the water because of these requirements.

So "Big Pharma" companies have a finite life to their products essentially, that life expires as soon as a generic is made available.

Maybe you would like your paycheck based on something like this too little mikee?
[ link to this | view in thread ]
Bengie, 8 Apr 2011 @ 9:24am

Re:
Easy, health care should NOT be for-profit. When there is money to be made on people's suffering, then the more suffering, the better.

See a problem with that?
[ link to this | view in thread ]
Chuck Norris' Enemy (deceased) (profile), 8 Apr 2011 @ 10:02am

We need expensive drugs!
Big Pharma Exec: "But...but...RESEARCH! We price our patented drugs so so we can continue to innovate and pay for R&D on newer, better medications to save people's lives. Wait...we shut down that department?! Somebody call the senator...we need to get these patents extended!"
[ link to this | view in thread ]
Anonymous Coward, 8 Apr 2011 @ 10:04am

Re:
Not really a conflict if you stop for a moment and reflect upon what happens when you see a doctor and (s)he writes a prescription. If a brand name is prescribed without noting that generic substitution is acceptable, many pharmacies will only fill the prescription with the branded drug.

Even when generics having substantially similar pharmacological/physiological effect are available, it is not at all unusual for them to be dismissed in favor of the branded drug.

Experience informs me that in the majority of cases a generic is perfectly acceptable. Unfortunately, generics are oftentimes overlooked because a strong trademark associated with a drug still under patent co-opts a generic lacking same.
[ link to this | view in thread ]
Nicedoggy, 8 Apr 2011 @ 10:09am

Isn't funny that some breakthroughs in medicine are coming from elsewhere?

IBM's MRSA-Fighting Nanotechnology Caps Century of Healthcare Innovation
[ link to this | view in thread ]
Anonymous Coward, 8 Apr 2011 @ 10:10am

Re: Re:
I almost forgot, generic manufacturers generally do not provide physicians will all sorts of nifty gifts. Ever seen you doctor fill out your medical history with a pen that does not bear a branded drug's name and logo?

There are times when it seems that looking at pens in an office gives more information than can be found in the PDR.
[ link to this | view in thread ]
The Devil's Coachman (profile), 8 Apr 2011 @ 12:23pm

Drug companies are not interested in saving lives, or improving health
Anyone who actually believes that crap should be in therapy. They are about one thing, and one thing only - PROFIT! If they can profit by having a monopoly selling a drug that has little more effectiveness than placebo, as opposed to spending real dollars on real research and development to improve their product, they will take the monopoly approach every time.

Cancer cures? Not going to happen, not ever. Not in my lifetime, and not in my great grandchildren's lifetimes. Not in Methuselah's lifetime. If they ever did come up with a cure, then the moment you're cured, they lose a customer. No, they'd rather come up with a pill that has more side effects than a cyanide, arsenic and plutonium cocktail, but extends your life's misery another couple of months, until you bleed to death out your bunghole from the toxicity, or die of a stroke from the incessant screaming in pain it caused. Means nothing to their executives, believe me. I can speak to this authoritatively, as a result of my personal medical experiences, and the ones I will surely undergo in the future. I know others who have gone before me, and what they went through. I do not look forward to that future.
[ link to this | view in thread ]
The eejit (profile), 8 Apr 2011 @ 12:40pm

Re: Brand Name Edge?!?!?
I'm pretty sure you keep getting hacked by Skynet. The spammers have better gramam and spelling than you.

As for that, there's a ridiculous solution to that last question: innovate.
[ link to this | view in thread ]
Anonymous Coward, 8 Apr 2011 @ 3:18pm

Re: Brand Name Edge?!?!?
"little mikee"

Again, just ignore the ten-year-old...
[ link to this | view in thread ]
velox (profile), 8 Apr 2011 @ 6:44pm

Re: Re: Re:
"Big Pharma used to do manufacturing really well, out of necessity because the FDA regulated them. Now that's been proven to be a joke, so there's no appreciable benefit to buying Advil over ibuprofen any longer"
The reason Big Pharma "used to be", but no longer is -- good at manufacturing is due in no small part to the fact that they outsourced their manufacturing over the past couple of decades.
Many of the drug shortages we've seen have been due to production stoppage because of quality control problems in their off-shore plants.

Of course this hasn't bothered them at all because ... quite fortuitously, when there is a problem with production, supply diminishes, and then prices go up.
The drug company is happy so long as they can get the supply restored in a few months, but at a new higher market price point.

--> Poor quality with high prices is a classic characteristics of a market with insufficient competition.

In the face of this however, the FDA is not only standing by, -- as has been discussed her for the past couple of weeks, they are actually pursuing policies that further decrease competition.
[ link to this | view in thread ]
Anonymous Coward, 8 Apr 2011 @ 6:48pm

Re: Re: Re:
This is an outdated comment, although in the past, it would have been on the mark.

Drug companies have not been able to distribute pens or other gifts with advertising in physician's offices since January 1, 2009. There are a few of these pens still around, but they are dwindling away.
[ link to this | view in thread ]
Anonymous Coward, 8 Apr 2011 @ 7:04pm

Re: Re:
"many pharmacies will only fill the prescription with the branded drug"
This is flat out wrong, and has not been true for many years. Pharmacies of all types and sizes have a much bigger profit margin dispensing generic drugs over branded drugs.
Some pharmacies will even try to call physician offices and falsely claim that a given patient's insurance company doesn't cover name-brand X so they can redirect the doctor to authorize a similar drug which has a generic version.

"Experience informs me that in the majority of cases a generic is perfectly acceptable."
This is absolutely true!

"Unfortunately, generics are oftentimes overlooked "
I'm not sure where you are writing from -- I assume the US. Your statement is actually no longer true in the US because the Insurance industry is now firmly in the driver's seat on the name-brand versus generic battle. Over the past 3-5 years, insurance companies have been able to redirect physicians and their patients to generics by just resolutely refusing to pay for branded drugs. The Big Pharma firms have no-one to blame but themselves since they have been so busy in futile searches for billion dollar block-busters that many potentially useful, but smaller niche drugs have gone undeveloped. With pipe-lines empty, and no new drugs to offer new and innovative treatment options, Pharma is in no position to ask the insurance industry to pay for branded medication.
The result is that in most regions of the US, generic drugs now constitute the vast majority of all prescriptions.
[ link to this | view in thread ]
nasch (profile), 11 Apr 2011 @ 10:27am

Re: Re:
IMO the implied statement is, monopolies of any kind are bad, unless it's unavoidable. If you *must* have a monopoly to get something done, than so be it. I doubt there's any scenario where it's possible to not have a monopoly, yet the monopoly is the better option.
[ link to this | view in thread ]