Pfizer Maneuvers to Undermine Generic Lipitor
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The Fiscal Times
December 2, 2011

The best-selling drug in pharmaceutical industry history, Pfizer’s cholesterol-lowering Lipitor, lost its patent protection Thursday. But the huge savings that consumers, insurance companies and the government usually realize when generic versions of a best-selling pill hit the market are still six months away, and, consumer advocates fear, may never come to pass.

The reason is the unprecedented series of side deals that Pfizer has signed in recent months with some insurers and pharmacy benefit managers to offer lower-priced versions of Lipitor, known generically as atorvastatin. They also are offering consumers $4 co-pays – comparable to prices paid at discount outlets like Walmart and Costco – so they’ll continue buying the brand name version of the drug.

Government officials fear the full cost of the drugs might then be passed along to insurers and Medicare, although the companies involved say that won’t happen.

The goal of the maneuvers is to keep as many of the estimated 8 to 10 million Americans who take Lipitor ($7.2 billion in U.S. sales in 2010; $10.7 billion worldwide) on either the branded product or on an “official” generic, which in Lipitor’s case will be marketed by Watson Pharmaceuticals. They will sell for about half the price of the branded product for about six months, when a number of generic makers are expected to hit the market. Their versions of atorvastatin could sell for as low as $50 a month, which is less than a tenth its current price and comparable to other generic statin drugs already on the market.

“We don’t see any scientific evidence why the price of Lipitor shouldn’t be anything other than the price of other generic statins,” said Dr. John Santa, who directs the Consumer Reports Health Ratings Center for Consumers Union. “Consumers should expect that they’re going to see competition.”

At stake isn’t just the $8 billion to $9 billion a year that the health care system will save by switching Lipitor users to the lowest cost generics that will be on the market by June of next year. Lipitor is the just largest of a number of big-selling brand name drugs that lose their patent protection over the next few years, a dreaded event dubbed “the patent cliff” by the brand name pharmaceutical industry.

In 2012, big-selling drugs that lose patent protection include Plavix, sold by Bristol-Myers Squibb and Sanofi Aventis. The popular blood thinning agent generated $6.2 billion in sales in 2010. Others losing patent protection include AstraZeneca’s Seroquel, an antipsychotic that generated $3.7 billion in sales last year; Merck’s allergy and anti-asthma drug Singulair, which produced $3.2 billion in revenue; and Takeda Pharmaceutical’s Actos, a diabetes drug with $3.4 billion in sales in 2010.

The 1984 Hatch-Waxman Act gives the generic manufacturer that is first to file an application for the right to produce a copycat version of a drug 180 days of market exclusivity. Indian drug maker Ranbaxy has those rights for Lipitor. During that half year, the generic, whether it comes from the first-to-file generic manufacturer or the company that the brand name companies uses to continue selling its version of the drug (in Lipitor’s case, Watson), usually sells for about half the price of the original brand name drug.

But then any generic manufacturer with the capacity to pass the purity tests administered by the Food and Drug Administration can begin to market a generic version. In most cases, the generic price quickly falls to 10 percent of the brand name price, and sometimes less.

In the past decade, brand name pharmaceutical manufacturers seeking to stave off generic competition have used the tactic of signing side deals with generic manufacturers who launch litigation challenging the validity of the original patent on its drug prior to expiration. The Federal Trade Commission has challenged a number of those anti-competitive “pay to delay” deals, which continue to proliferate despite government efforts to put an end to the practice.

In fact, Ranbaxy’s introduction of a generic version of atorvastatin was delayed for five months due to a pay-for-delay deal it signed with Pfizer in 2008. A recent FTC report counted 28 pay-for-delay deals in the past year involving 25 brand-name drugs with annual sales of more than $9 billion.

But Pfizer’s latest move to protect its Lipitor franchise by signing side deals with insurers and pharmacy benefit managers after patent expiration is a new strategy for frustrating the intent of the Hatch-Waxman act, which has been one of the more successful pro-consumer laws in U.S. history. About 78 percent of all prescriptions today are for generic drugs, even though the generic drug manufacturing industry accounts for well under half of the $307 billion-a-year U.S. pharmaceutical market.

Expressing concern that the next generation of generics won’t get the market share they deserve, Senators Max Baucus (D-Mont.), Charles Grassley (R-Ia.) and Herb Kohl (D-Wis.) earlier this week sent a letter to Pfizer and five companies demanding records of the deals. “Consumers and taxpayers foot the bill when drug benefit companies and insurers manipulate the marketplace to prevent access to generic drugs,” Kohl said in a statement.

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.