Let’s Throw a Patent-Burning Party
When a drug goes generic, it’s as if society has paid off a mortgage
Peter Kolchinsky, Ph.D.
This is a re-publication of an op-ed that first appeared in the Wall Street Journal on September 30, 2018 and is now included in The Biotech Social Contract series of articles that aim to define the biopharmaceutical industry’s social contract with America, to examine practices that deviate from that contract, and to propose refinements to healthcare policy to ensure that our continued investment in scientific progress ultimately yields affordable, effective therapeutics for future generations.
Article 1: America’s Social Contract with the Biopharmaceutical Industry
Article 2: What happens when a drug won’t go generic?
Article 3: Protecting Off-Patent Sole-source Drugs from Price-Jacking
Article 4: Why wait for Generics? In praise of me-too drugs
Article 5: False Heroes — How PBMs Add Insult to the Injury of Insurance Cost-Sharing
Op-Ed: Let’s Throw a Patent-Burning Party
Article 6: The favors they do us: Charging less in other countries makes drugs more affordable in America
Article 7: Hard Negotiating Tactics: Compulsory Licensing and Willingness to Deny
Article 8: Unintended Consequences of “Fairness”: Critically examining the idea of the US referencing EU prices
Article 9: Direct-to-Consumer (DTC) Advertising: misnamed, misunderstood, and underappreciated
Article 10: The strange and special case of epinephrine
Please see Important Disclosures for Readers at the end.
People used to throw mortgage-burning parties when they paid off their home loans — flame-fed celebrations marking an inflection point toward independence.
It’s time to throw a party for Lyrica, Pfizer ’s Swiss army knife of a blockbuster drug that treats epilepsy, fibromyalgia and several neuropathic-pain-related ailments. Lyrica’s patent expires in December. Once it “goes generic,” its sales will almost immediately crater as multiple companies begin selling the drug’s active ingredient, pregabalin, at steep discounts to Pfizer’s brand.
As a society, we’ve nearly paid the mortgage on Lyrica. It was expensive. The FDA originally approved Lyrica in December 2004, and within three years the drug reached $1 billion in sales. In 2017 Lyrica’s global sales nudged above $5 billion. Along the way Pfizer used many pharma tricks, legal and illegal, to boost sales. In 2012 Pfizer won a lawsuit against generics companies that challenged its patents. In 2009 the company paid a record $2.3 billion fine to the Justice Department for improperly marketing Lyrica.
Pfizer has also imposed its share of price increases. Lyrica’s list price has risen 163% since 2012, although net price increases were lower due to the byzantine system of drug rebates. Pfizer has even developed a once-daily pregabalin (regular Lyrica is taken twice-daily). Approved in 2017 as Lyrica CR, and on patent until 2026, it will be a nice-to-have option for those unfazed by the higher copayment.
Because insurance companies saddle patients with high copays, branded drugs like Lyrica are unaffordable to some patients. In the U.S. only 11% of all prescriptions are for branded drugs, the rest for generics. Yet society can afford to make mortgage payments on these assets for our lasting benefit. At about 1.8% of U.S. gross domestic product, payments for branded drugs are a worthy investment. Health insurance in America should be reformed to pay for innovation and allow patients to afford their prescribed treatments.
Lyrica’s U.S. patents expire in December but are likely to be extended through June 2019 thanks to a Food and Drug Administration program encouraging companies to demonstrate whether drugs work on children. Until then, Lyrica will help power the biopharma ecosystem with profits. But whether in two months or eight, generic pregabalin will appear on the other side of the ledger, becoming an inexpensive societal resource indefinitely. Pfizer says that more than nine million Americans have been prescribed Lyrica. Over the next several decades, tens of millions more may benefit from generic pregabalin.
Lyrica’s mortgage burning is a high-profile manifestation of the fundamental contract the biopharmaceutical industry has with America. Society pays for expensive patented drugs in order to incentivize intrinsically risky and expensive research and development. But patents expire, those expensive drugs become inexpensive generics, and society reaps the rewards forever, or until a better drug comes along on which it’s worth paying a new mortgage. That’s the ideal.
For the contract to really work, there are kinks to work out. Namely, some pharma companies go too far in trying to extend their drugs’ patent lives, turning justifiable mortgages into unjustifiable rents. Occasionally they even rebrand older, off-patent medicines without any innovative upgrades, which may feel like having your house stolen and sold back to you. And insurers offload too much of the cost of innovative, patented drugs onto patients through onerous cost-sharing structures.
Because human biology is essentially unchanging, many drugs we use today will work as well in a century. Some may even work better with improved diagnostics, delivery technologies and insights into drug combinations. Thus the scientific progress we achieve in our lifetimes will also benefit future generations.
Generics work just as well and meet the same safety standards as original branded drugs, offer huge cost savings almost immediately, and, with few exceptions, remain inexpensive forever. Cholesterol-lowering statins alone have helped decrease deaths from heart attacks and strokes by 50% throughout the developed world over the last few decades. When Pfizer’s patent on the best-selling statin Lipitor yielded to generic atorvastatin, the price quickly dropped by 95% and has remained comparatively negligible. Lyrica is likely to experience a similar fate.
Celebrating the end of a drug’s patent life — and its new life as an extraordinarily inexpensive societal resource — reminds us why these drugs are so valuable to patients and physicians in the first place. We should celebrate, as a society and an industry, when the best drugs cross the generic threshold. Lyrica’s mortgage is nearly paid off, and patients will enjoy the benefits of generic pregabalin for decades to come. Let’s light the fire and start the party.
Peter Kolchinsky, Ph.D.
Peter Kolchinsky is a founder, Portfolio Manager, and Managing Director at RA Capital Management, LLC, a multi-stage investment manager dedicated to evidence-based investing in healthcare and life sciences. Peter is active in both public and private investments in companies developing drugs, medical devices, diagnostics, and research tools, and serves as a Board Member for various public and privately held companies, including Dicerna Pharmaceuticals, Inc. and Wave Life Sciences Ltd. Peter also leads the firm’s outreach and publishing efforts, which aim to make a positive social impact and spark collaboration among healthcare stakeholders, including patients, physicians, researchers, policy makers, and industry. He authored “The Entrepreneur’s Guide to a Biotech Startup”, written on the biotech social contract, and served on the Board of Global Science and Technology for the National Academy of Sciences. Peter holds a BS from Cornell University and a Ph.D. in Virology from Harvard University.
Important Disclosures for Readers
The contents of this publication are intended for informational and educational purposes. The views and opinions expressed are those of the author and are subject to change. They do not necessarily reflect the views or opinions of RA Capital Management® or any other person the author is affiliated with.
Nothing of the content should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or product. The author and/or RA Capital Management® may hold or trade securities of the companies named in this publication or that manufacture the drugs discussed.
Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this article are trade names, service marks, trademarks or registered trademarks of their respective owners.
The author’s opinions are based upon information he considers reliable, and there is no obligation to update or correct any information provided.
© 2018 Peter Kolchinsky, Ph.D.
