The idea behind a patent is to give the owner a legalized monopoly to encourage innovation.

Patents are limited to 20 years, after which the invention passes into the public domain and can be freely copied. Thus, inventors have an incentive to create new and better things, as they will benefit from the monopoly long enough to make the effort pay off, but not long enough to be able to rely on an invention indefinitely.

No industry takes this model more seriously than pharmaceuticals, because patented drugs in this country often have prices much higher than those that can be charged for drugs with generic competition.

Now, a pharmaceutical company becomes the latest target in the sights of New York Attorney General Eric Schneiderman. Schneiderman has criticized Actavis Plc for its decision to recall its immediate-release version of the drug Namenda. Namenda’s immediate-release patent, which is used to treat Alzheimer’s disease, is set to expire soon, and Actavis plans to discontinue the drug in favor of a new, extended-release version.

Schneiderman’s theory is that it is a violation of antitrust laws for a patent holder approaching the end of its useful life to stop selling the patented invention in favor of a new product with an extended patent life. towards the future. Schneiderman finds it even more outrageous for a company to withdraw its old proprietary drug from the market before its generic competition can legally hit pharmacy shelves, because that forces users of the old drug to switch to the new, possibly improved, product to the time. when cheaper substitutes are not yet available. In a statement, Schneiderman described Actavis’s actions as “messing with the system.” (one)

In other words, Schneiderman believes that a patent owner has a moral and legal obligation to facilitate competition that the patent system is designed to allow inventors to avoid.

I understand from an ethical and financial point of view why the attorney general feels like him. Changing medications is often a complicated prospect, and one that many doctors and patients might prefer to avoid. But legally, Schneiderman’s argument doesn’t seem to make much sense. Once generic alternatives hit the market, physicians and patients are free to revert to the old formula if they wish. In addition, private companies generally do not have a legal obligation to continue selling products that they do not want to sell.

The Actavis strategy is not new, not even uncommon. Claiming that it is illegal will not. And while the arguments about whether the strategy is unethical will undoubtedly continue, even the attorney general cannot properly sue a company just because it does something he wishes it didn’t do. For now, Actavis plans to continue the change, according to a spokesperson. (two)

Taken to its logical conclusion, Schneiderman’s real objection is that state laws are designed to force generic substitutions unless prescribing physicians check a box under a mark instructing the pharmacy to “dispense as written,” often abbreviated as DAW. Therefore, by law, generics almost always win when they are available. However, if a doctor prescribes a brand for which there are no generics available, DAW is irrelevant. The attorney general’s real problem is with the laws governing generic substitution and with doctors who are too uninformed or thoughtless to consider less expensive alternative treatments. This is exactly why pharmaceutical benefits in insurance programs have forms, designed to create incentives to use more cost-effective drugs.

Aside from the publicity it generates for New York’s ambitious attorney general, this action seems misguided. If Schneiderman wants to prevent drug companies from tampering with the patent system, there is no point in requiring them to act against their own financial interests. Sharks do what they do because they are sharks. It is useless to demand that they act like goldfish.

Instead, the solution to the problem that Schneiderman has identified is to change state regulations, if he can convince legislators, to encourage wider use of generics that are therapeutically comparable even when they are not clinically equivalent. Then let the marketplace, including form-building insurers, take care of the rest.

Sources:

1) Bloomberg, “Actavis Sued by New York AG Over Alzheimer’s Drug Swap”

2) The Wall Street Journal, “What Will NY AG’s Antitrust Lawsuit Mean for Actavis? Read Here”