Wednesday, September 24, 2014

Pharmaceuticals in the News

Alzheimer’s brings me to medication and litigation this morning. At first blush, the connection of Alzheimer's to workers’ compensation seems tenuous, but the connection comes back to pharmaceuticals, and everyone knows that from muscle relaxants, to pain inhibitors, to blood pressure control and more, pharmaceuticals play a role in many workers’ compensation cases.

Pharmaceutical companies invest huge amounts of money in the research and development aspects of medications. After they perfect something, they spend a great deal of time and money in the approval process required by the Food and Drug Administration (FDA). In most cases, medication must be approved by a vetting panel at the FDA, without which approval is unlikely. This is not always the case, however, and sometimes
 the FDA even overrides its own panels to approve seemingly unnecessary medications which present potential risks to patients and society.

The reward for all that effort, time and money is a patented medication for the marketplace.
 The patent generally lasts for 20 years. Thus, for 20 years the company can charge “name brand” prices for the medication it has developed and generate profits that are commensurate with all of that investment, rather than merely with the cost of manufacture and distribution. Sometimes the actual chemicals involved in a medication are not very expensive and the manufacture/distribution process not complex.

The fact that the raw materials, manufacture and distribution are not complex or expensive is one explanation for why generic drugs are so much cheaper than “name brand.” According to some, another reason is that generic manufacturers do not spend the same money on advertising, promotion and marketing. When is the last time you saw an advertisement on television for a generic medication?

There is a benefit for the pharmaceutical companies to advertise. They have invested heavily in research, development and approval for a new combination of substances/chemicals which are efficacious against some malady, symptom or condition. They have 20 years to recoup that investment, then the patent expires and other manufacturers will produce the “bioequivalent,” or “generic” of that compound of substances and the sale of the “name brand” will undoubtedly be affected. It is possible that the "name brand" will persist thereafter, some people still buy "Tylenol" instead of generic acetaminophen.

According to, generic drugs are 80-85% less expensive than “name brand” drugs. In other words, a “name brand,” like Namenda for example, that costs as much as $2.50 per dose, would cost about $.37 per dose in generic. That means someone taking two Namenda per day would spend about $150.00 per month on the "name brand," and taking the generic equivalent would instead cost about $22.50. Generics are big business; according to, 78% of all prescriptions in the United States in 2010 were generic.

The logic is easy to follow. Who is paying for these prescriptions? If it is a person, they will naturally seek the lowest cost alternative unless they are convinced that there is a genuine benefit to the “name brand” prescription. If it is an insurance company, they will certainly seek to minimize their expenditure and maximize savings, the same way a self-pay patient would. And, if it is a program like workers’ compensation, the decision may be made by adjusters or by some system like the
 Texas approved formularyUnder all scenarios, we would be likely to see a tendency toward generics.

This subject is in the news because the New York Attorney General has filed
 an antitrust lawsuit against Actavis PLC, the company that developed and sells Namenda. Actavis developed Namenda in 1995 and got it approved to sell in 2003Their 20 year patent expires in July 2015 (notice that with the approval process time considered, the company got about 12 years of profitable distribution from their 20 year patent). They know, as do we all, that this chemical compound is likely to be manufactured by a variety of companies immediately after the patent expires. The generic manufacturers will seek to profit from selling their far less expensive alternative to a great population of users that have been marketed to and recruited by Actavis in the last twelve years.

A few years after Namenda went on the market, Actavis developed a second version of Namenda, called Namenda XR. This is “extended release,” and by using it the patient can take one pill each day instead of two regular Namenda. This XR version was also patented, and that patent has a few more years until expiration. So, it is alleged that Activis’ goal is to get patients to switch from Namenda to the XR form. This keeps them as customers even when the new generics of Namenda (generic name
 “memantine”) hit the market in 2015. That’s right, there will not be a “one pill per day” generic, only a “two pill per day” generic.

How to get patients to switch now though? A marketing campaign? Sales representatives convincing doctors that the change is needed? Activis has decided instead to simply withdraw Namenda from the market. It will allegedly forego the last few profitable months of Namenda sales. By withdrawing it from the market, they leave physicians with little choice but to switch their patients to Namenda XR. According to the New York Attorney General, "this means that most Alzheimer's patients and their families will end up paying for the higher priced drug, even when the generic version is the doctor-recommended and cost-effective choice."

Of course, those patients could rectify their own dilemma. That is, they could take the Namenda XR for the next year, and then return to their doctor in August or September of 2015. At that time, they could remind their physician that they were on “two pills per day” and they were forced to “one pill per day” and that they would now (in 2015) like to switch back to “two pills per day” and take the generic pills now that they are available.

The problem with that “self-help” method of reacting to Activis is that people are creatures of habit. This is particularly true with some “seasoned” Americans, as you may know if you have ever tried to explain to your grandparent or parent why something in their treatment regimen was changed. Hint, some do not tend to take kindly to changes in their schedules, their pills, or much else for that matter. Are we not all like that to some degree, whether it is our preferred parking place, the kind of coffee creamer we are used to, or otherwise?

The attorney general’s lawsuit says that Activis’ claims “that Namenda XR is a superior drug simply because it can be taken once a day instead of twice – rings hollow.” They allege that the “forced switch” to the XR version has no health benefit, but is merely to “blunt the financial impact” to Activis and its related companies when the “two pills per day” Namenda patent expires.

I know, Namenda and Alzheimer's are just not large workers' compensation issues. But, if this course is successful for Activis, then it could be applied to other medications by other manufacturers. The practice could be used industry-wide to lengthen the protection period for patented medications in a far broader context than this one.

Some would argue that the effect on workers’ compensation would be minimal. Certainly if the injured worker did not instigate that post-patent expiration return to the doctor, the carrier would likely prompt it nonetheless. This is likely true in the health insurance setting also, although in the meantime there may be a significant effect on the patient from medication co-pays and deductibles. Of course, there is cost and time expended for those doctor visits required for the change back to the then cheaper medication.

New York Attorney General Eric Schneiderman is saying that "by forcing patients to switch to Namenda XR, Activis is gaming the regulatory system that governs pharmaceutical and violating antitrust laws designed to encourage competition and keep prices down for consumers." This, he says, undermines the pharmaceutical marketplace generally. New York claims that by the elimination of non-XR Namenda (the “two pills per day”), Activis will enjoy profits by "eliminating patient choice and manipulating the treatment plans for these vulnerable patients."

Coming days, weeks, and months will tell if this situation is really noteworthy. Whether the implications are far-reaching or not, it is interesting. If it is significant, the implications for a vast array of medications could affect workers' compensation and the other broad markets of American health care.

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