When it comes to branded and generic drugs, the listing of key issues in this image misses a trick. The labels are identical.
This lack of difference is a consequence of the 1984 Hatch-Waxman Act which after two decades of dispute staked out a boundary between generic and branded pharmaceutical companies, part of which in the case of their drugs required the generic companies to take over the label of the branded drug when they entered the market.
The Cost of Drugs
The issue of branded and generic took shape in the 1950s. Before then the primary way companies controlled drug niches – monopolized on the sale of profitable drugs – was through branding rather than patents. This meant there were a lot of branded generics and a lot of companies who manufactured drugs for other companies who branded and marketed.
The branding and marketing cost money and was the major component of a drug’s price – that and profit taking. If consumers could access “raw” medicines the same way they can access unbranded other products, they would be able to save money. And driving down the price of drugs was the main goal of Estes Kefauver’s hearings on the pharmaceutical industry that led to the 1962 Amendments to the Food and Drugs Act.
Kefauver failed in his goal of containing prices. Other changes his amendments introduced, such as the need to prove a drug worked before marketing and the use of controlled trials to achieve this, drove the price of drugs up. As prices rose during the 1960s, for a variety of reasons support for the idea of increasing the flow of generic drugs began to grow.
The main block to the use of generics was legal. Most American states for instance had anti-substitution laws, meaning that, if a doctor wrote a script for a branded drug, a pharmacist could not substitute a cheaper generic drug.
Battle lines were drawn between the consumer movement, a relatively powerful lobby in the 1960s, and the branded industry who for the most part were operating behind a shield of doctors.
The push to repeal anti-substitution laws and greater use of generics was portrayed as a push for socialized medicine and an infringement of the sacred relationship between doctor and patient. Do you want your doctor to give you the best or the cheapest drug?
Pharmacists were warned about the risks of being sued by patients if they were to intervene and swap drugs and something then went wrong.
Staring in 1974 with Kentucky a trickle of states repealed their anti-substitution laws, while Oklahoma refused to do so. The key moment came in 1978 when New York opted to allow substitution. This was key because where other states had lists allowing twenty or thirty drugs to be substituted, using cloak and dagger methods Bill Haddad in New York had created a list of 800 FDA supported substitutions. It was this rather than Haddad’s later involvement with Orrin Hatch and Henry Waxman that brought generics into play.
Hatch-Waxman tidied up the loose ends. It gave the branded industry a modest amount of patent extension and streamlined the process for generic drugs to enter the market.
A central element of the deal involved the label generic companies would run. Generic companies can make chemicals but the branded companies run the trials and collect the early data on a drug that makes the label and transforms a chemical into a medicine. The best deal seemed to be for generic companies to take over the branded label lock stock and barrel.
When the Supreme Court ruled in 2011 that generic companies could not be sued in a failure to warn case, because they had not done the warning, this set up a predictable clash. In 2001 when Prozac went off patent and Barr Laboratories brought out a generic fluoxetine, it was clear that at some point the question of suicide on a generic SSRI would become an issues.
The Dolin case is where the rubber hits the road. Some higher court will have to decide on the merits of allowing GlaxoSmithKline to be sued when Stewart Dolin committed suicide while taking generic paroxetine rather than Paxil. This may take some years to sort out, with every iteration in the legal process cementing Stewart Dolin’s name in legal history.
Meanwhile, the cost of branded drugs around 1962 was less than $10 Billion per year. In 1984, the year of Hatch-Waxman, it was slightly over $20 Billion per year. It is now a $1,200 Billion per year operation.
Somehow every action in the pharmaceutical sphere has a way of turning out exactly the opposite of what its promoter intended.