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Savings Ahead in Generic Medicines

Patents are expiring on four big brand names, including Zocor and Zoloft. Pharmaceutical companies have a plan to keep cashing in.

July 15, 2006|Daniel Yi | Times Staff Writer

Consumers stand to save billions of dollars in prescription drug costs in the next few years as an unprecedented wave of expensive brand-name medications come off patent, facing competition from far-cheaper generic versions.

Four of the nation's 10 best-selling prescription medicines -- treating common ailments ranging from high cholesterol to asthma -- are due to lose patent protection starting this year through 2010. Never have so many branded drugs, with annual sales of as much as $75 billion, lost their patents in so short a time, experts say.

The savings for consumers could be enormous. Unlike hospital or doctor care, which is expensive but paid mostly by health insurance, patients pay a relatively higher share of prescription drug costs out of their own pockets. The high cost of brand-name drugs has driven many Americans to import less-expensive versions from Canada and other nations.

Generics can cost as much as 80% less than their branded versions. General Motors Corp., for example, said employees in its prescription drug plan are paying 90 cents a pill for the generic version of cholesterol-lowering Zocor, which lost its patent last month, compared with as much as $4.50 for the branded version.

Users of rival cholesterol-fighter Lipitor, the nation's top-selling prescription medication whose patent doesn't expire until 2011, could also save by switching to generic Zocor.

The generic versions generally offer no loss in quality and effectiveness, medical experts say.

"For the vast majority of patients, generics work just like the brand drugs," said Debra R. Judelson, a Beverly Hills cardiologist.

Phyllis Gottlieb, one of Judelson's patients, is enjoying significant savings with generics. The 71-year-old retired Westside resident uses five prescription drugs, including medicines for high blood pressure and arthritis. She said she chooses generics whenever possible, and they help keep her monthly prescription tab under $100.

"The price of some brand drugs is absolutely phenomenal," Gottlieb said. "And I am insured. I am paying $50 at the cash register, and someone next to me is paying $200."

Generic drugs have been around for decades. Their share of prescriptions filled has grown steadily over the years, accounting for just over half of all prescription drugs sold today versus a quarter two decades ago. That share could rise beyond 60% by the end of next year, said Ron Fontanetta, a healthcare specialist at Towers Perrin, a human resources consulting firm.

The surge in generics stems from an innovation boom in the early 1990s, when giant companies such as Merck & Co. and Pfizer Inc. launched a series of blockbuster medicines.

By law, patents last about 20 years, but companies spend many of those years testing and getting government approval for their new drugs. The creators are typically left with between 12 and 14 years of exclusive rights to sell the drugs, usually at high prices, to recoup the enormous cost of developing them.

Many of those patents from the '90s innovation wave are now expiring.

A few days after Merck's cholesterol-fighting Zocor, the nation's No. 2-selling prescription drug, lost its patent last month, the patent expired on Pfizer's anti-depressant Zoloft, ranked No. 7. The patent for Pfizer's high blood pressure medicine Norvasc expires next year. Advair, GlaxoSmithKline's asthma fighter, loses its patent in 2008.

Express Scripts Inc., one of the country's largest managers of pharmacy health benefits, estimates the potential savings from generics this year alone at $24.7 billion.

That is unlikely to make a major dent in the country's escalating $2.6-trillion healthcare bill. Prescription drugs represent a relatively small portion of the bill -- 10%, compared with 30% for hospitals and 21% for physician services.

But for many individuals' health budgets, the savings can be huge. Patients with health insurance pay as much as a quarter of prescription drug costs out of their own pockets, compared with 20% for dental, 16% for physician services and 7% for hospitals.

How much consumers will save depends on how aggressively health plans and care providers steer patients to generics.

The growing competition from generics is driving some brand-drug makers to aggressively guard their market shares. Consumer advocates say that the tactics could stifle competition from generics.

Some brand makers use "authorized generics" to compete against their generic rivals. Authorized generics are either licensed or manufactured by the brand makers and are essentially the brand drug in a different bottle.

Merck introduced an authorized generic version of Zocor last month. Pfizer said it will introduce a generic Zoloft as soon as a rival firm begins selling a non-branded version later this year.

Merck also offered to slash Zocor's price for some large health plans before its patent expired, a move that consumer advocates and some lawmakers labeled as anti-competitive.

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