The American Interest
Analysis by Walter Russell Mead & Staff
Big Pharma: Crooks or Benefactors?

Is Big Pharma pressuring states to grant drug companies an effective monopoly on their most popular drugs? According to the NYT, Amgen and Genentech are leading a charge in many U.S. state legislatures for bills that would prevent pharmacists from selling “biosimilars”—that is, generic versions of biological drugs—in place of their brand name parents. Eight states have introduced such bills, and Virginia has already passed one:

The companies and other proponents say such measures are needed to protect patient safety because the generic versions of biological drugs are not identical to the originals. For that reason, they are usually called biosimilars rather than generics.

Generic drug companies and insurers are taking their own steps to oppose or amend the state bills, which they characterize as pre-emptive moves to deter the use of biosimilars, even before any get to market.

There may be valid points on both sides here. On the one hand, blocking cheaper generic versions in a class of drugs that, according to the NYT, makes up a quarter of the $320 billion spent on drugs in the U.S., will surely push health care costs up and further thwart Obamacare’s cost-saving mechanisms.

On the other hand, Big Pharma’s financial investment in research and development helps fuel medical innovation in this country. The ability to make money off patented drugs is an important incentive that encourages these companies to spend as much as they do on R&D,  and given the length of time it takes to bring a drug from laboratory to market, companies often struggle to recoup those costs before the patents run out. And, we should add, they may even have a valid point about the safety and effectiveness of biosimilars. But this is a question for more research.

This is just another example of the unmanageable complexity of our health care system. It’s a mess of conflicting interests, where every gain in one place is offset by a loss in another. We need price signals, not politicians, lobbyists and appointed experts, to drive the evolution of the system, and subsidies to ensure a sufficient level of access for the poor.

Published on January 31, 2013 12:45 pm