GPhA had another titillating annual meeting in Phoenix over the weekend. The event was long on rhetoric and economics, and short on science.
David Snow, Medco’s CEO did an excellent job of teeing up the economic issues and previewing Medco’s new analysis on generic prescribing patterns. For every one percent increase in generic utilization, Medco figures the healthcare system saves $4 billion. Medco is not run by humanitarians and every one percent increase in generic utilization results in millions of dollars in profit for Medco. Snow highlighted that Medco’s strategy is to promote generics direct to consumers (DTC), while offering “incentives” (i.e., cash payments) to doctors who prescribe generic products instead of branded ones—all out of view from consumers. Since most states have mandatory generic substitution laws, Snow is referring to class substitution, such as the simvastatin for Lipitor (note entry on Lipitor outcomes ).
Interestingly enough, David Snow was unwilling to criticize “authorized generics,” long a thorn in the side of the generic pharmaceuticals industry and a topic high on their legislative agenda. Why break ranks with the generics firms? Snow contends his focus is 100% on what benefits consumers. Put differently, if authorized generics reduce prices faster, increase competition and save patients money, then Snow/Medco have no objections. Interestingly enough, this is exactly what PhRMA have been saying.
Mark McClellan, former head of FDA and CMS, now a fellow at the American Enterprise Institute provided the best view of the generics market. He noted that the U.S. has the highest rate of generic utilization in the world and that generic drugs are also cheaper here. McClellan also noted that the FDA’s “limited steps” towards biosimilars, however the generics industry needs to do more than clamor for legislation. He strongly urged GPhA and the generics industry to bring its science forward for review and evaluation, noting that “a legal pathway is not a scientific pathway.” Put differently, a legislative victory in Congress is not scientific acceptance (or equivalence) for generic biologics.
Then a Lehmann Brothers analyst noted that the larger generics firms are consolidating at a record pace. This continues to still be benefit consumers, but for how long? It its limited survey of a handful of generic drugs, AARP has noted that prices declined 2% in 2006. However the Lehmann Brothers analyst noted that there is some upward pricing of generics these days, especially among older products. He also noted that “lower pricing does not ultimately lead to market share gains,” therefore generics firms are tending price in a narrow range and at higher-than-historical levels. Lehmann had an interesting take on authorized generics—the authorized generic product does not capture largest market share (this is still won by the generic product).
Many thanks to GPhA for serving up such good food and terrific golfing!