Pharmaceutical Product Hopping: A Proposed Framework For Antitrust Analysis

Skyrocketing drug prices are in the news. Overnight price increases have riveted the attention of the public, media, and politicians of all stripes. But one reason for high prices has flown under the radar. When drug companies reformulate their product, switching from one version of a drug to another, the price doesn’t dramatically increase. Instead, it stays at a high level for longer than it otherwise would have without the switch. Although more difficult to discern than a price spike, this practice, when undertaken to prevent generic market entry, can result in the unjustified continuation of monopoly pricing, burdening patients, the government, and the health care system as a whole. Not all reformulations pose competitive concerns. Empirical studies have shown that more than 80 percent can be explained by improvements that are not temporally connected to impending generic entry. But a dangerous subset of such reformulations is undertaken for one, and only one, reason: to delay generic entry. In such cases, reformulation is called “product hopping.” When generics enter the market, the price can fall dramatically overnight, by as much as 85 percent. For that reason, brand firms have every incentive to delay this moment of reckoning as long as possible. Sure enough, making trivial changes to their drugs has that effect. Every state has a substitution law that requires or allows pharmacists to offer a generic drug when the patient presents a prescription for a brand dru...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Costs and Spending Drugs and Medical Innovation antitrust drug reformulations Hatch-Waxman Act prescription drug prices product hopping Source Type: blogs