Generic jolt

The debate over the cost of prescription drugs usually focuses upon the research and development aspect of the pharmaceutical industry, on the extent to which the high cost of inventing a drug and bringing it to market justifies the high profits that can follow. Lawsuits recently filed by Maine, 22 other states and the Federal Trade Commission shift attention to the generic end of business, where the R&D is already done and the profits are often obscene.

The multi-state and FTC actions allege that Mylan Laboratories of Pittsburgh, the second-largest generic manufacturer in the world, conspired with four active-ingredient suppliers to monopolize the market for the generic drugs lorazepam and clorazepate. Lorazepam is used to treat anxiety, tension, agitation and insomnia and is prescribed heavily for nursing homes and hospice patients. Clorazepate treats anxiety and hypertension, and also is used as an adjunct therapy for nicotine and opiate withdrawal.

After the frail elderly, the terminally ill and the addicted were identified as worthy prey, the predators, according to the complaint, hatched this scheme: Mylan entered into exclusive, long-term contracts with the four suppliers for the active ingredients; once competitors were cut off and out of business, the suppliers would share in Mylan’s profits.

And what profits they were. Since the market was cornered in August 1997, the retail prices of these drugs have gone up by as much as 3,200 percent. In one case, a bottle of 500 clorazepate tablets increased from just over $11 to $377. In another, 500 lorazepam went from $7.30 to $191.50.

In the big picture, enormous sums are at stake: More than 18 million prescriptions for lorazepam and 3 million for clorazepate are written each year. The FTC wants $120 million in damages from Mylan; the states, still tabulating their costs, will seek millions.

At the small-detail level comes the sad human toll. Pennsylvania’s suit cites a 67-year-old heart attack patient who was forced to cut her clorazepate dosage in half — against her physician’s strong advice — because of the price increase. In New Jersey, a 77-year-old man stopped taking his medication so there would be enough for his wife.

What is particularly galling about this case is that, while the argument rages over whether the American taxpayer is getting fleeced by funding billions in medical research as it pays full retail for the new drugs that result, the generic component was considered to be one part of the pharmaceutical public/private partnership the federal government had right. The 1984 Waxman-Hatch Act eliminated the requirement that generic drugs had to go through the same years-long testing and approval process as the original version. That law and several adjustments that have followed to limit the exclusive rights of the patent holder have reduced the cost of producing generic drugs by tens, if not hundreds, of millions of dollars. Part of the bargain was supposed to be that some savings got passed along to the consumer.

Maine’s part of this litigation is small; lorazepam and clorazepate are small parts of Mylan’s 87-product lineup and a tiny fraction of the entire generic-drug business. But, if nothing else, this state/federal action sheds some long-overdue light on this dark corner of the pharmaceutical industry.