Editorial: Probe into drug pacts is needed

Friday, Oct. 13, 2000 | 9:47 a.m.

It is promising that the Federal Trade Commission will subpoena records from 90 drug makers, investigating whether pharmaceutical companies have used tactics to keep lower-cost generic drugs out of the hands of patients. The FTC's announcement comes just five months after it filed complaints against four pharmaceutical companies for allegedly entering into agreements that essentially blocked the generic equivalent of two brand-name drugs -- Cardizem-CD and Hytrin -- from entering the market.

The commission is basing its investigation on concerns involving a 1984 law that was supposed to bring about more competition between brand-name and generic drugs. But one of the legislation's authors, Rep. Henry Waxman, D-Calif., is worried that some of the law's incentives have been manipulated to delay competition.

This isn't about chump change. As FTC Chairman Robert Pitofsky noted, over the next five years brand-name drugs with $20 billion in annual sales in the United States will go off patent. And when drug makers lose patent protection, that means their profits are affected. Yet if the generic versions of these drugs aren't allowed in the marketplace, then consumers are hit hard by having to pay steep prices for drugs.

This law has been of a tremendous benefit to consumers. As the New York Times noted in a story Thursday, a generic company-sponsored study last year found that between 1985 and 1997, patients were able to save a combined $112.5 billion when they bought generic drugs. It's also important to mention that the economist who prepared the study, Paul MacAvoy, an adviser to Presidents Ronald Reagan and George Bush, reported that even with the lost sales to generic drugs, it didn't stop the brand-name companies from performing essential research and development. Indeed, their research and development during that same period increased from $4 billion to $18 billion.

It also should be remembered that the high price of drugs not only hits consumers in the pocketbook, but the exorbitant costs of brand-name drugs can be harmful to patients as well. If patients can't afford drugs critical for their care, this could have devastating consequences for their health. It is vital, then, that patients have continued access to generic drugs.