Drugmakers Create Their Own Generics to Stifle Competition

According to reports, brand-name drugmakers and pharmaceutical companies are nowadays implementing a strategy in which they make generic versions of their own authorized drugs to stifle the competition by keeping the drug costs high. This strategy is quite common among brand-name drugmakers and pharmaceutical companies that aim to maximize profits on their off-patent drugs.

One significant example of this strategy is PDL BioPharma’s step to create their own generic version of Tekturna. The company implemented this strategy as a result of the threat of a generic rival to their $40 million blood-pressure medicine. While the strategy keeps the competition weak and drugs expensive (even with prescription discounts) according to critics, it worked in the favor of PDL BioPharma as their generic version of Tekturna stole the increasing momentum from the rival company that was posing a threat to the company, with its generic drug, hence protecting their sales even though the patent of Tekturna ran out last year.

The competing generic were selling their drug for $166 a month. PDL made a generic version of their own drug and started selling it for $187 a month. Their brand-name Tekturna yields even higher profit as it runs around $208 a month.

The strategy, regardless of the criticism, became popular very quickly last year. As a result, the launch of authorized generics was announced on weekly basis. For example, Mylan created a generic version of EpiPen. On the other hand, Eli Lilly also made plans to launch a cheap version of Humalog, it’s brand-name insulin.

Lawmakers who were responsible for creating the modern generic drug industry probably never imagined that it would turn out like this – big pharmaceutical companies and drugmakers creating their own generic drugs to maximize profits and stifle the competition. However, it’s not really surprising. In fact, according to FDA, over 1,200 authorized generic drugs have now been approved in the U.S. Although it seems that the popularity and high demand of generic drugs would push the prices down and encourage the use of prescription discounts, authorized generic drugs can be just as profitable, if not more profitable as compared to brand-name drugs.

While the authorized generics are sold at relatively inexpensive prices as compared to brand-name drugs, the margin of profit for the drugmakers is roughly the same even if they don’t offer prescription discounts. The primary reason behind it is that they generally aren’t subject to rebates that flow from the drugmaker or pharmaceutical company to middleman and effectively lower the revenue of the brand. According to a research, the authorized generic drugs return was about $50 for every dollar invested in 2015.

According to critics, authorized generic drugs are not good for the long-term competition as they increase costs by stealing sales from existing generic rivals and basically force their competitors to create their own generic drugs. However, brand-name drugmakers disagree. According to them, authorized generic drugs reduce prices and increase the competition, so they are good for both short-term as well as long-term.