ECONOMIC WISDOM FOR BABIES # 9THE BATTLE BETWEEN GENERIC DRUGS AND BRANDED DRUGS
W.A. Wijewardena, Deputy Governor, Central Bank of Sri Lanka
The Professor Emeritus from the Faculty of Medicine, an eminent academic andrespected physician, was extremely unhappy. His colleagues, despite repeated pleadings,have been prescribing branded drugs to patients oblivious of the high costs to them.
“Multinational drug companies are charging exorbitant prices for their branded
products when the same drug in generic form is available at a fraction of the price. Ourphysicians also support them by prescribing the branded drugs to patients. Drug
companies are paying to physicians in various forms and that practice is highly unethical”
“That can’t be avoided”
I said. “You’ve to blame the gov
ernment controls and the
peculiar nature of the drug market for that, as you say, undesirable development”
He did not want to give in easily. So, he demanded a fuller explanation.
“Governments throughout the world…” I started my explanation. “…
olled the production and prescription of what’s kn
own as western drugs. Thedeclared goal of this is to protect the patients. So, all western drugs have to go through avery stringent approval
procedure before they’
re released to the market. Not only that,government rules have dictated that these drugs should be prescribed by a qualifiedphysici
an, if they’re to be sold by a pharmacist. The first rule makes the manufacturing of drugs expensive. The second one has distorted the drug market”
He looked at me as if he could not understand the logic
. So, I continued. “The
approval process requires drug manufacturers to continue testing those drugs first withanimals and then with human beings for about three to four years. The test reports have tobe maintained laboriously to satisfy drug approving authorities. All these are very costly.Hence, drug manufacturers have to spend almost an equally large amount on testing asdeveloping and manufacturing the drugs. As a result, those branded drugs are normallyvery
“Then, how come those generic drug producers could supply them at a lower price?” He countered me.
“Those generic manufacturers don’t spend any money on research and
development. They simply copy the formula and manufacture drugs.
So, they don’t have
development and approval expenses which the branded drug manufacturers would haveto recover from buyers. Also, according to US patent rights, after 10 years, patent holderloses the right and anyone could manufacture the drugs. This short time duration forcesbranded drug people to recover their very high research and development expenditure andother costs on approval and so on as quickly as possible. Hence, drugs are priced torecover the total costs within the first four to five years and earn a sufficient profit rateduring the balance five year period.
You’ll therefore see that generic manufact
urers arefree riders
who live on the labours of others”
“What’s wrong with that if patients get cheaper drugs?” He questioned.
“The problem is that if branded drug firms don’t do research and de
then, we don’t have
drugs at all for generic people to copy. The pharmaceutical industryis one of the industries that spend a very large proportion of its income, usually about 10percen
t, on research and development. Besides, we’ve problems regarding the quality