As you know, I used a similar example (Claritin-Clarinex) in my Econ section the other day as an example of price discrimination. (Price discrimination defined as: “charging different prices depending on whether the customer is more or less informed, e.g. charge a given price unless the customer has information that the product is available at a lower price elsewhere”. It’s not a perfect example, I know, but price discrimination is illegal — and that makes it difficult to find pure examples.)

Anyway, a question that came up a few times was about the connection between the loss of a patent and the transition from a prescription-only medication to an over-the-counter drug. Is there any connection? I hypothesized, based on nothing whatsoever, that the loss of a patent would provide an increased incentive for drug companies to lobby the FDA to make the drug OTC. My reasoning was that since the drug would (likely) enjoy a higher rate of sales OTC, this would help to mitigate the loss in profit that resulted from the expiration of the patent.

Was I making stuff up?

I honestly don’t know the answer to that. I’d imagine that there’s some kind of connection, but once a med is off-patent, then I think that it’s not just the original patentholder that gets to market it over the counter, but any company that makes the drug. That means that sure, the original pharm company can make more money, but so can other companies. And given that OTC drugs cost much, much less than prescription ones (would anyone pay $120 for 30 days of omeprazole over the counter?), I don’t know where the numbers end up.

Of course, here in Portland [the vanguard of all things in healthcare :-)] we’ve been working against this kind of crap for the past year or two. No more spiffs!

http://www.biohope.org/media/article.cfm?articleid=2651&state=or

Your omeprazole-esomeprazole discussion nails the problem pretty well. I’ve written about comparable issues in psychiatric medications, my own area, on my weblog. One factor you do not mention is that, as with many of the efforts to develop new twists on medications whose patents are expiring, esomeprazole is an isomer of omeprazole. In some instances, only one of the stereoisomers is active and, if complications arise from the inactive isomer (a big IF) then eliminating it may be of advantage. I don’t know about omeprazole and its isomer, but I was recently surprised to find that the development of the antidepressant escitalopram (S-citalopram), one of the isomers of citalopram, has turned out to be a good thing. Escitalopram turns out to be freer of side effects and probably has a more rapid onset of action than the ‘mixture’. Think about it; 20 mg of citalopram (which has around 10 mg of the active isomer and 10 mg of the inactive) ought to be compared with 10 mg of escitalopram. Lo and behold, the latter is priced LOWER too! (Although the prices of all modern psychopharmaceuticals is an obscenity, IMHO, it’s a matter of degree…) If the other isomer of omeprazole is inactive, it would seem if you need 40 mg of that, you should get away with 20 of esomeprazole for the same effect.

But this is, of course, another way the pharm companies boost profits. Time and again in psychopharmaceuticals, I see initial dosing ranges which are too high, and later research establishes you can get away with 50%, or even 20%, of what you thought you needed to prescribe when the medication was rolled out, with increased tolerability in the bargain at the lower dose.

I don’t want to get into a big thing here, because I don’t know the first thing about the specifics of this case, but I do find it odd that you somehow assume that the profit motive is not a good thing. It is that very quest for profit which drives drug discovery (and virtually all beneficial innovation) - which is an extremely expensive undertaking and whose costs need to be recovered through what you might consider to be “high” prices. But, clearly, if the drug is not superior to cheaper alternatives, it is up to consumers and/or doctors to choose the less expensive option. That’s how the free market works.

Unfortunately, we don’t have nearly enough free market incentives in health care, which is why we have costs increasing more rapidly than in nearly any private sector industry - litigation is one issue, but the bigger issue is indirect payer system. Since incrimental consumption does not equate to incrimental expenditures for the average consumer, people generally consume too much health care (in the form of excessive tests and/or more expensive medicine which may not be needed - like antibiotics for a cold).

One more point - only 9.4% of all health care expenditures last year went to purchasing drugs (less than the percent spent in Japan, Italy, France, teh UK, Canada, or Germany). Compared to the cost of visiting a doctor or a hospital stay, the incredibly low cost of prescription drugs is a modern miracle.

I don’t make the assumption that profit motive is not a good thing, Paul, I just make the assumption that pure profit motive, at the expense of all else, is not a good thing. I’m all for drug companies throwing huge dollars into R&D with the expectation to get that money back once they hit on a patentable drug, but this country has placed a premium on limiting the lifetime of that patent, and when the same companies then do every dishonest thing that they can, both to extend the life of the patent and to get the drug accepted despite any proven benefit, then I’m not so much in favor. (And importantly, I think that there isn’t a single biochemist who could say with a straight face that it’s purely coincidental that Nexium is coming to market just as Prilosec is lapsing off patent.)

I totally agree with you, as well, that it’s up to doctors to prevent new drugs with no benefit from becoming mainstays in medical practice; that’s why I expressed such dissatisfaction with the fact that the pharm industry has been so successful in getting doctors to prescribe these drugs (PDF). I’m not sure how much responsibility rests on the shoulders of the consumer, though — they should be able to rely on their doctors for expert advice, so in that respect the doctors who push new drugs at the behest of the drug companies are still abrogating their responsibility, but likewise, consumers do need to understand that everything they hear on TV about the “new purple pill” may not be true.

Additionally, arguing that medication costs being 9.4% of expenditures means that medications are low-cost isn’t valid — it’s comparing apples and oranges. You’re right, prescription medicines are currently around 10% of U.S. health care spending, but that’s because U.S. health care spending is so astronomical in other areas relative to other countries (an observation validated by your second point, that the direct access to health care in the U.S. means people end up seeing more specialists, getting more tests, having more technological interventions, and thus, spending more of the U.S. health care dollar). The more meaningful angle on this is that despite these other gargantuan expenditures, spending on prescription drugs is the fastest-rising component of the American health care budget.

And lastly, I agree that despite all of this, the relatively low cost of prescription meds is a miracle, but that’s because there’s a big chunk of prescription drug costs that’s accounted for by the sale of generic drugs. This is how it’s supposed to work — drug companies have the patent period to recoup R&D costs, but the eventual lapse in all the med patents helps keep drug expenditures down. The manipulation of the market with drugs like Nexium, Clarinex, and the like is what upsets the apple cart, and like I said, it saddens me, because the undermining of the entire health care system stands to hurt us all.

OK, so it doesn’t sound like we actually disagree much (since my wife works for Merck she has a somewhat stronger disagreement) - my question is, why do you think doctors would prescribe a more expensive, wholly equivelant drug? Do they get some sort of kickback, or is it just so that they get invited to more junkets? What’s their motivation?

I can only speculate, Paul. I think that part of it has to do with the fact that drugs like Nexium and Clarinex are advertised directly to the consumer, and some doctors are honestly scared that if they don’t prescribe them, they’ll lose patients. Another part of it has to do with doctors who don’t take time to read the evidence critically, and just trust AstraZeneca when it says that Nexium is better than omeprazole. (Yep, it’s true that there are slews of doctors out there who don’t keep up with research or current literature at all. It’s embarassing, but it’s true.) And yet another part of it really is a willingness to alter choices of medications in return for drug lunches and whatnot.

Couldn’t agree more, Jason. I think its the combination of patients directly asking for the drug they saw on tv, whether they need it or not, and doctors prescribing what the drug companies are “paying” them to prescribe. Of course, I don’t think much of doctors anyway, their job isn’t to get you better, it’s to get you coming back for more visits!

Josh, I think it’s a bit of an overstatement to say that doctors don’t work to make you better; in fact, I take that as an insult. I work my ass off to make kids better, and frequently, my parting words to parents is that I hope never to see them again. Alas, I’ve found that there’s little to no chance to convince people like you otherwise, though, so I’m not going to waste much more screen real estate on it.