Executive Briefings

The Generic Drug Industry Has Brought Huge Cost Savings. That May Be Changing.

A decade ago, physicians who treat epilepsy got what seemed like a piece of good news: Eight companies had received federal approval to sell a generic version of an injectable lifesaving drug.

Doctors liked the brand-name drug Cerebyx because it was safer and easier to use than a previous medicine that stopped seizures but could cause terrible skin reactions. The only problem was that it was too expensive for many hospital pharmacy budgets. A widely available and cheaper generic version would remove those cost barriers - or so doctors thought.

But the introduction of Cerebyx’s generic form, fosphenytoin sodium, in 2007 — called “fospheny” for short by some doctors — did not over the long term produce the robust marketplace competition that is one of the main arguments for the generic industry.

The trajectory of generic Cerebyx shows the limitations of relying on the market alone to bring down drug prices and ensure supply — particularly for hard-to-make injectables or low-volume drugs, which are critical to the people who need them.

It’s the flip side of the low prices in the generic industry: Thin profit margins can turn temporary challenges such as active ingredient shortages or manufacturing delays into decisions to discontinue a drug altogether.

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Doctors liked the brand-name drug Cerebyx because it was safer and easier to use than a previous medicine that stopped seizures but could cause terrible skin reactions. The only problem was that it was too expensive for many hospital pharmacy budgets. A widely available and cheaper generic version would remove those cost barriers - or so doctors thought.

But the introduction of Cerebyx’s generic form, fosphenytoin sodium, in 2007 — called “fospheny” for short by some doctors — did not over the long term produce the robust marketplace competition that is one of the main arguments for the generic industry.

The trajectory of generic Cerebyx shows the limitations of relying on the market alone to bring down drug prices and ensure supply — particularly for hard-to-make injectables or low-volume drugs, which are critical to the people who need them.

It’s the flip side of the low prices in the generic industry: Thin profit margins can turn temporary challenges such as active ingredient shortages or manufacturing delays into decisions to discontinue a drug altogether.

Read Full Article