Corruption On Display: Big Pharma Lobbies To Limit Generic Drugs

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Biotech firms are lobbying at states to limit access to generic drugs so that consumers will instead have to buy their more expensive original drugs.


Let me be clear from the outset: I am not saying that big pharmaceutical firms are evil and are run by scoundrels, I am saying that we have a political system that allows pharmaceutical firms to influence (and write!) laws that maximize their profits, and so, like any rational, profit-maximizing actor, they do.

With that as backdrop, the New York Times reports that big pharmaceutical firms, particularly biotech giants Amgen and Genentech, are lobbying and proposing laws to limit the use of generic drugs. Specifically, Amgen and Genentech, are pushing bills that would restrict the ability of pharmacists to substitute generic versions of biological drugs for brand name products. Biological drugs are drugs manufacutred in living cells, and, according to the Times, account for 25% (and growing) of drug sales in the U.S.

Is this law inherently a bad idea? No. Is it actually a bad idea? Quite likely. Here's why: we have a privatized system of developing new pharmaceutical drugs, meaning that the developers are firms like Amgen, Genentech, GlaxoSmithKline, etc., and not the government. To encourage these firms to research, we award them patents, which gives them a monopoly on sales of drugs that they develop for a set period of time. Once that period is over, generic drugs, which are more or less identical to the brand name ones may be developed. It is the job of the government to set a patent period that strikes a balance between incentivizing pharmaceutical companies to make new drugs and allowing access to those drugs at an affordable rate for most consumers.

So, how is that working? Well, according to Business Week, Amgen netted $4.3 billion last year. Roche Holdings, Genentech's parent company, more than doubled that, netting $9.3 billion in 2012.

So, these guys are doing well. But what about the contention of the big pharmaceutical companies that generics are less safe, and so keeping them off the market is about protecting consumers, and the giant rise in profits to pharmaceuticals is incidental? That's possible, but asking big pharmaceutical firms about generics is like asking McDonalds about Burger King: it's the last place you would go to get a trustworthy response. Certainly McDonalds could give you good tips on where to look for trouble within Burger King, but you wouldn't take their word for it, would you?

No, and that's why we have the Food & Drug Administration (FDA) to be an independent body to protect consumers by figuring that sort of thing out. There are complex issues around "biosimilars" and how they should be regulated (the Times article covers this well), but again, that's the FDA's job.

Unfortunately it's also the job of state and federal legislatures and the lobbyists they listen to. At least eight states have introduced pharma-backed bills, and one sailed through the Virginia House of Delegates 91-6.

The politicians aren't the evil ones either. They have to raise  millions of dollars, and they are more likely to get that from giant pharmaceutical firms making billions of dollars in net profits than they are from you and me. That's the real problem, and until we fix how elections are run and financed, corporations will continue to write bills that increase their profits.

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