The Cost to Public Image of Delayed Generics

Yesterday there was an article carried in the Washington Post stating that, according to an FTC report, brand name drug companies are increasingly prone to reaching deals with generic companies to delay their entry onto the market.  In essence, a brand name pays a generic to stop pressing its patent case. 

Recently, the FDA issued a study that demonstrated that the more generics that enter the market place, the lower the price falls in competition.  (See posting of April 6). 

The Federal Trade Commission had sought to end this practice by pharmaceutical companies, but was found by courts to be going beyond its authority in doing so.  Therefore, there is nothing illegal about the practice.  In fact, it would be my pesonal view that in a free market society, if one has the right to go to market with a product, one also has the right to sell that access to anyone interested in buying it.  But in response to the situation, the Post article further stated that the Pharmaceutical Manufacturers Association declined to comment and the Generic Pharmaceutical Association was said to be studying the report. 

One cannot second guess such a response without all the facts, and it is an issue with profound legal consequence, but it also has profound communications/public image consequences.  On top of that, trade associations are not known for their stealth.  But if one stops to ask why the public views the pharmaceutical industry only as trustworthy as big oil or tobacco? – then this should answer their question. 

The public is not likely to hold big pharma in very high esteem when they realize that the industry has paid off its little brother to keep away the competition.  Therefore, while this practice may ultimately be found to have no legal downside, one must certainly factor in toll this action takes on the already poor public image of the pharmaceutical industry – and perhaps question whether the delay of generics by a few years onto the market is actually worth that price in the long run.  But most certainly, in the near term, both the pharmaceutical and generic industries will have to respond with something sturdier than – no comment.

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2 Responses to The Cost to Public Image of Delayed Generics

  1. My experience within the industry tells me that pushing the envelope, especially in the sales and marketing area, has been and will continue to be standard practice. Since there is money at stake, some individuals will take a risk and knowingly compromise laws, ethics and/or social responsibility. Paying a generics firm to keep a drug off the market is one good example of this. It may not be illegal, as your post has pointed out, but something is still seriously wrong with it.
    Mind you, the generics firm is just as guilty here as the pharmacutical company. I’m sure, however, that while they go into these deals, publicly they tout how socially responsible they are by providing cheaper alternatives to the public. So, both industries are at risk here.
    And don’t forget the effect that this all has on the employees of these firms. It’s just like Enron. When questionable practices eventually catch up with these companies, the employees feel betrayed. And rightfully so. Most of them are doing honest work with the notion that the company they work for has integrity and brings benefit to mankind.
    Senior management has to recognize the need for honest conduct and not plead ignorance when questionable practices come to light. Prevention is the answer. Perhaps the new focus on the role of the Chief Compliance Officer will move things in the righ direction.

  2. Ed Vawter says:

    I agree and I think eventually the bad publicity will outweigh the advantages gained. This is especially true in todays culture where such items are immediately publicized on the Internet. However, it may not happen in the near future. I think that the American short-term mentality contributes to this phenomenon and allows companies to forego thinking about the long run and concentrate on the next quarter. I personally believe this sort of approach will catch up with them eventually but can not point to any evidence of that currnetly.